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TL;DR
Amazon said AWS revenue rose 39% in the third quarter, its fastest growth rate since late 2021, while the cloud unit’s operating income increased 55%. The company spent $75.9 billion on capital projects during the quarter and reported trailing 12-month free cash flow of negative $42.4 billion, as it builds capacity for cloud and AI demand.
Amazon reported 39% third-quarter growth at Amazon Web Services, its fastest pace since the end of 2021, while spending $75.9 billion on capital projects in the quarter. The company said much of its investment is directed toward AWS and artificial intelligence infrastructure; its trailing 12-month free cash flow fell to negative $42.4 billion, underscoring the gap between the cost of building capacity now and revenue expected over time.
AWS revenue reached $46.0 billion in the July-to-September quarter, and operating income rose 55% to $17.8 billion, according to Amazon’s results. The source report says AWS growth accelerated for six consecutive quarters, from 17% to 39%, excluding currency effects. Amazon chief executive Andy Jassy said the AWS contracted order book, a measure of future revenue commitments, grew to $578 billion from $496 billion three months earlier.
Chief financial officer Brian Olsavsky said the quarter’s $75.9 billion in cash capital spending primarily related to AWS and AI. Jassy said most of Amazon’s roughly $220 billion spending plan for 2026 would go to AWS, and the company expects spending to be “meaningfully more” in 2027. Amazon had previously planned about $200 billion for 2026 and raised that figure in July, citing higher memory prices, according to CNBC as summarized in the source material.
The source report calculates that free cash flow for the 12 months ending in the third quarter was negative $42.4 billion, compared with positive $14.8 billion a year earlier. Amazon generated $168.3 billion in operating cash flow over that period, while capital spending reached $210.7 billion. The report estimates the quarter’s free cash flow at about negative $33.5 billion; that quarterly figure is the author’s calculation, not a number stated directly in the supplied Amazon release. Amazon’s long-term debt rose from $65.6 billion to $173.1 billion over nine months, according to the source.
Amazon’s overall results also included areas that missed expectations. Earnings per share of $1.89 fell short of the $1.96 analysts expected, while advertising revenue missed estimates, the source says, citing CNBC, LSEG and StreetAccount. Amazon’s revenue forecast for the holiday quarter was slightly below expectations. Shares fell more than 6% in after-hours trading following the report, according to the source material.
Infographic 01 · The scorecard
Fastest cloud growth in five years, deepest cash gap.
Amazon’s third quarter (July to September 2026), scored against the four numbers from my 28 October preview.
The four numbers from my preview, scored for Amazon
Status chips: ok = healthy, hold = watch, urgent = warning sign. My assessment.
- 1 · Capex planAbout $220B for 2026, unchanged holdRaised from $200B in July, citing memory prices. 2027: “meaningfully more”, no number.
- 2 · Cloud vs. capexAWS +39%, operating income +55% holdGross capex +120% vs. a year earlier ($77.3B vs. $35.1B, my arithmetic). Revenue grows fast; spending faster.
- 3 · Free cash flow + fundingDeeply negative, financed with bonds urgentAbout −$33.5B in the quarter (my arithmetic). $48.1B of new long-term debt in Q3.
- 4 · CapacityCustomers take it as fast as it is installed okBacklog +$82B in one quarter. Big blocks reserved well in advance; visibility into 2027–2028.
What beat
- AWS revenue $45.98B vs. $45.29B expected
- AWS operating income $17.77B vs. $16.97B expected
- Operating margin 13.9%, Amazon’s highest ever
What missed
- Earnings per share $1.89 vs. $1.96 expected
- Advertising $19.64B vs. $20.82B expected
- Q4 revenue guide midpoint $243.5B vs. $244.5B expected
- Shares down more than 6% after hours (CNBC; GeekWire: more than 7%)
Sources: Amazon Q3 2026 release, 29 Oct 2026; Amazon Q3 call, third-party transcript; CNBC, 29 Oct; CNBC, 30 Jul; GeekWire, 29 Oct. Analyst expectations as reported by CNBC (LSEG, StreetAccount). Quarterly free cash flow and capex growth: my arithmetic from Amazon’s cash flow statement. Status chips: Thorsten Meyer.
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The Cost of Building AI Capacity
The results put a central question for Amazon in focus: whether the cash spent on data centers, chips and related equipment will produce returns at a pace investors find acceptable. AWS’s rising sales and operating income show strong current demand and earnings from the cloud business. But the company is paying for infrastructure ahead of much of the revenue it expects to earn from that capacity, contributing to negative free cash flow.
The order book offers evidence of demand, but it is not cash already collected. Amazon’s $578 billion in contracted future revenue is expected to be recognized over time, while construction and equipment bills arrive earlier. For businesses buying cloud services, the build-out may mean more access to AI computing capacity, though Amazon’s statements indicate that some capacity is booked well in advance. For investors, the spending scale and the time needed to turn capacity into cash are key parts of the earnings picture, alongside AWS growth.
Amazon’s spending also has implications beyond cloud customers and shareholders. Data centers require land, equipment, electricity and water. The company announced a $1 billion “Built Together” program for communities near its U.S. data centers, including energy and water-efficiency upgrades. The source material does not give a breakdown of how much of Amazon’s capital spending is allocated to power or other infrastructure costs.
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AWS Growth and Spending Plans
The third-quarter report followed a period of rising AWS growth rates. The source lists growth of 17%, 20%, 24%, 28%, 37% and 39% over six successive quarters beginning in the second quarter of 2025, excluding currency effects. AWS remains Amazon’s cloud computing business, selling computing, storage and related services to organizations.
Amazon is investing in facilities and in its own chips, including Trainium for AI workloads and Graviton processors. Jassy said the company is installing an AI accelerator about every 14 seconds and that revenue commitments for its two chip lines had risen more than 20-fold in a year. Amazon also said customers saved more than $2 billion in the quarter by using its chips; that is the company’s own estimate, not an independently verified figure in the supplied material.
Amazon says most AWS capacity is owned or leased on a long-term basis. Jassy argued that relying on capacity rented from specialized providers can reduce a cloud operator’s margin by about 35 percentage points. That figure is his claim, not an audited comparison provided in the source. Amazon has also said it plans to sell Trainium chips outside AWS beginning in late 2027.
“Primarily relates to AWS and AI.”
— Amazon CFO Brian Olsavsky
How Quickly Spending Pays Back
The results do not show precisely when Amazon expects the new capacity to generate enough revenue and cash to offset its investment. The $578 billion order book represents contracted future revenue, but the source material does not specify how quickly those commitments will be delivered or how much profit they will produce.
Amazon has not provided a detailed breakdown of the $75.9 billion quarterly spending figure among data centers, chips, land, power and other equipment. The source also does not establish how much of the spending will be funded from operating cash, debt or other sources. Long-term debt increased over the nine months cited, but the supplied information does not attribute that entire change to the AI build-out.
The reason for the after-hours share decline cannot be established from the price move alone. The source reports that investors were also responding to earnings per share, advertising and holiday-quarter revenue expectations that came in below forecasts. It does not quantify how much each factor contributed to the decline.
Amazon’s 2026 and 2027 Build-Out
Amazon’s next test is whether it can keep expanding AWS while delivering on its spending plans and improving cash generation. The company expects about $220 billion in capital spending during 2026 and said 2027 spending will be meaningfully higher. Its coming quarterly reports will show whether AWS growth and operating income continue to rise, and how much of the new capacity is being brought into service.
Customers and investors will also be watching for signs of supply constraints, including memory and energy availability, which Amazon cited among its risks. Amazon has said it plans to sell Trainium chips outside AWS from late 2027; further details on that plan, including commercial availability and scale, were not provided in the supplied material.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% year over year to $46.0 billion in the July-to-September quarter, according to Amazon. The source describes this as its fastest growth rate since the end of 2021.
How much did Amazon spend in the quarter?
Amazon reported $75.9 billion in cash capital spending for the quarter. CFO Brian Olsavsky said the spending primarily related to AWS and AI.
Why was Amazon’s free cash flow negative?
The source reports that Amazon generated $168.3 billion in operating cash flow over the trailing 12 months while capital spending reached $210.7 billion. The author calculates free cash flow at negative $42.4 billion for that period; the supplied material attributes the shortfall mainly to the rapid investment program.
Does AWS’s order book mean Amazon has already received the money?
No. The $578 billion order book refers to contracted future revenue, according to CEO Andy Jassy. It is not the same as cash already collected, and the supplied material does not detail when the contracts will turn into revenue or cash.
What is Amazon planning to spend next?
Amazon expects about $220 billion in capital spending for 2026 and has said spending in 2027 will be “meaningfully more.” The source says most of the 2026 plan is directed toward AWS.
Source: ThorstenMeyerAI.com
