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TL;DR
Amazon said AWS revenue grew 39% in the third quarter, its fastest rate since late 2021, as the company continued a costly build-out of data centers, chips and other equipment. Trailing 12-month free cash flow fell to minus $42.4 billion, and Amazon shares dropped more than 6% in after-hours trading after results that also missed some analyst expectations.
Amazon’s AWS revenue grew 39% in the third quarter, its fastest pace since late 2021, even as the company spent $75.9 billion in cash capital spending during the quarter on data centers, chips and equipment. Amazon shares fell more than 6% in after-hours trading on Thursday, October 29, as investors weighed the rapid cloud growth against the cost of its build-out and results that missed some expectations.
AWS brought in $46.0 billion in revenue for the July-to-September quarter, while operating income rose 55% to $17.8 billion, according to Amazon’s earnings release. The company’s reported growth rate has accelerated for six consecutive quarters, from 17% in the second quarter of 2025 to 39% in the latest quarter, excluding currency effects, according to the source material.
Chief Executive Andy Jassy said AWS’s contracted future revenue, known as its order book, reached $578 billion, up from $496 billion three months earlier. That increase points to substantial contracted demand, but it is not the same as revenue already earned: the services are delivered and paid for over time.
Chief Financial Officer Brian Olsavsky said the quarter’s capital spending “primarily relates to AWS and AI.” Amazon’s trailing 12-month free cash flow was minus $42.4 billion, compared with positive $14.8 billion a year earlier. The source’s estimate of about minus $33.5 billion for the quarter alone is the author’s calculation, not a figure directly reported by Amazon. Amazon shares also faced pressure from earnings per share of $1.89, below the $1.96 analysts expected, and a holiday-quarter revenue forecast described as slightly below expectations, according to the cited reporting and analyst data.
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 show the trade-off facing Amazon as it expands infrastructure to serve cloud and AI customers: contracted demand is growing, but buildings, chips and related equipment require large cash payments before all the resulting services generate revenue. Amazon’s reported order book is evidence of future commitments, not a guarantee about when those commitments will become sales or what margins they will produce.
The gap matters to investors because major spending can weigh on free cash flow and financing needs even while AWS revenue and operating income rise. It also matters to cloud customers: Amazon is adding capacity and developing its own chips, but the timing and availability of particular services may vary. The figures alone do not establish how much customers will pay or whether the investment will earn an adequate return.
For Amazon’s retail business, the market reaction also reflected concerns beyond AWS. The cited results included an earnings-per-share miss and a holiday revenue outlook below expectations. The share-price decline therefore cannot be attributed to cloud spending alone based on the available information.
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Spending and Growth in Perspective
Amazon said in February that it expected capital spending of about $200 billion in 2026, then raised that estimate in July, citing higher memory prices. The company now expects about $220 billion for the year and “meaningfully more” in 2027, according to the source material. Jassy said the majority of the 2026 plan is directed to AWS.
Amazon’s property and equipment rose from $357.0 billion at the end of 2025 to $508.9 billion at the end of September. Depreciation and amortization, which spreads the cost of assets over time, increased 25% to $20.9 billion in the quarter. That expense reflects the longer-term cost of equipment already in service; it is separate from the immediate cash paid to build or acquire assets.
Amazon also designs its own Trainium AI chips and Graviton processors. Jassy said revenue commitments for the two chip lines rose more than 20-fold in a year, and that customers saved more than $2 billion in the quarter by using Amazon’s chips. Those are company-provided figures. Amazon has said it plans to sell Trainium outside AWS from late 2027.
““Meaningfully more” in 2027.”
— Andy Jassy, Amazon chief executive
Returns and Capacity Still Unclear
Amazon has not provided a precise breakdown of the $75.9 billion quarterly spending by data centers, chips, power and other categories. The company said AWS and AI were the primary uses, but the available figures do not show how quickly each investment will become productive capacity or revenue.
The $578 billion order book represents contracted future revenue, but the timing of delivery, customer usage and profitability is not specified in the source material. Nor does the cited information establish how much additional debt Amazon may take on to fund its plans. Long-term debt rose from $65.6 billion to $173.1 billion in the first nine months of 2026, according to the source, but the reasons for that movement are not fully detailed here.
Amazon’s own claims about savings from its chips and the margins of owned, leased and rented capacity have not been independently verified in the supplied material. The outlook also faces risks the company identified, including energy costs and supply volatility for memory chips.
Watch Spending and Cloud Delivery
Investors will look for updates on capital spending, free cash flow and AWS growth in Amazon’s next results and earnings commentary. The company has indicated that 2026 spending will be about $220 billion and that spending will be meaningfully higher in 2027, but has not specified a 2027 dollar amount.
For cloud customers and investors, the next practical measure will be whether Amazon brings new capacity online and converts its contracted commitments into reported revenue and operating income. Amazon’s plan to offer Trainium chips outside AWS is scheduled for late 2027; further details on timing and availability have not been provided in the source 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 the fastest growth rate since late 2021.
Why did Amazon shares fall after the report?
Amazon shares fell more than 6% in after-hours trading. The source points to concern about heavy investment and negative free cash flow, alongside earnings per share below analyst expectations and a holiday-quarter revenue outlook described as slightly weaker than expected. The available information does not establish one sole cause for the decline.
What does Amazon’s $578 billion AWS order book mean?
It is the amount of contracted future revenue Jassy said AWS had, up from $496 billion three months earlier. It is not revenue already earned, and the source does not specify when all of it will be recognized.
How much is Amazon spending on capital projects?
Amazon spent $75.9 billion in cash capital spending in the third quarter. It expects about $220 billion for 2026 and said spending in 2027 will be “meaningfully more,” without giving a specific 2027 total in the supplied material.
Is Amazon’s free cash flow negative?
Yes. Amazon’s trailing 12-month free cash flow was minus $42.4 billion, compared with positive $14.8 billion a year earlier. The source also offers an author-calculated quarterly estimate of about minus $33.5 billion; that is not presented as an Amazon-reported figure.
Source: ThorstenMeyerAI.com
