🔍 Read the full analysis: Can Amazon’s Cash Spending Keep AWS’s Growth Momentum Going? on ThorstenMeyerAI.com
Get business pricing on monitors, keyboards and dev gear
- Business-only prices and quantity discounts
- Tax-exempt purchasing
- Multiple users, one account, clear invoices
TL;DR
Amazon said AWS revenue climbed 39% to $46 billion in the third quarter, while its contracted future revenue backlog rose to $578 billion. The company also spent $75.9 billion on capital investments during the quarter and reported trailing 12-month free cash flow of minus $42.4 billion, adding to investor concerns about how quickly its AI and data-center investments will pay off.
Amazon reported that AWS revenue rose 39% to $46 billion in the third quarter, its fastest growth since late 2021, even as the company spent $75.9 billion on capital investments during the three months. The results put the gap between surging cloud demand and the cash required to build AI infrastructure at the center of investor attention; Amazon shares fell more than 6% in after-hours trading, according to the source report.
AWS operating income increased 55% to $17.8 billion, while the cloud unit’s growth accelerated for a sixth consecutive quarter, according to Amazon’s results. The source report lists growth rates of 17%, 20%, 24%, 28%, 37% and 39% since the second quarter of 2025, excluding currency effects. CEO Andy Jassy said AWS’s contracted future revenue, or backlog, reached $578 billion, up from $496 billion three months earlier.
Amazon’s spending is rising faster than the cash it generates. Capital spending paid in cash reached $75.9 billion in the quarter, which the company’s chief financial officer, Brian Olsavsky, said primarily related to AWS and AI. Amazon generated $168.3 billion in operating cash flow over the trailing 12 months, up 29%, while capital spending over that period was $210.7 billion, up 82%. The resulting trailing 12-month free cash flow was minus $42.4 billion, compared with positive $14.8 billion a year earlier.
The quarter also included weaker results against some market expectations. The source report says earnings per share were $1.89, below analysts’ $1.96 estimate, and that advertising revenue missed expectations. Amazon’s revenue forecast for the holiday quarter was slightly below expectations, according to the report, which cites CNBC, LSEG and StreetAccount data. Those shortfalls arrived alongside the spending figures, rather than negating AWS’s reported growth.
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.
Powered by Thorsten Meyer AI
The Cost of Building AI Capacity
Amazon is making a large bet that demand for cloud computing and AI services will support years of investment. The $578 billion AWS backlog is evidence of contracted future business, but it is not the same as cash already collected: revenue is recognized as services are delivered. That timing difference helps explain why a strong growth rate can coexist with negative free cash flow.
The capital build-out also matters to AWS customers. Amazon says capacity is being reserved ahead of delivery, with large blocks of AI computing capacity booked well in advance. If supply remains tight, customers could face delays or higher prices for scarce capacity; the source report says short-term capacity on older AI chips is being sold at a premium. The earnings report does not establish how long those conditions will last.
For investors, the question is whether added data centers, chips and power infrastructure can earn returns that justify the outlay. Amazon expects capital spending of about $220 billion in 2026 and said it expects to spend “meaningfully more” in 2027. That spending could support future cloud sales, but it also raises financing and depreciation costs before all the capacity is operating at full use.
Popular right now
TCL QM64L 85-Inch QD-Mini LED 4K Smart Fire TV
Shark HydroVac MessMaster Corded Wet/Dry Vacuum, Mop & Self-Clean (WD161)
Dyson Ball Animal 3 Corded Upright Vacuum
As an affiliate, we earn on qualifying purchases.
Backlog Meets a Larger Build-Out
Amazon’s investment plan has grown during 2026. The source report says the company expected about $200 billion in capital spending in February, then raised its outlook in July, citing higher memory prices. Jassy said most of the roughly $220 billion planned for 2026 would go to AWS. Olsavsky’s description of quarterly spending as primarily related to AWS and AI points to the cloud build-out as the main driver.
Amazon’s property and equipment rose from $357 billion at the end of 2025 to $508.9 billion at the end of September, an increase of about $152 billion over nine months, according to the source report’s figures. Jassy said the company is installing an AI accelerator about every 14 seconds. Amazon also designs Trainium AI chips and Graviton processors; the company says its chip business is growing at triple-digit rates and commitments for the chips have increased more than 20-fold in a year.
Amazon says customers saved more than $2 billion during the quarter by using its own chips. That is a company-provided estimate, not an independently established measure in the source material. Jassy also argued that owning or leasing infrastructure long-term can be more profitable than renting capacity from specialized providers. His comparison of operating margins was presented as a competitive argument, not an audited industry-wide finding.
Returns and Cash Timing Remain Unclear
The earnings figures show strong AWS growth and a large backlog, but they do not establish when the new capacity will produce enough cash to offset investment. Amazon has not provided a precise timetable in the source material for when free cash flow may return to positive territory, or how much of the backlog will be recognized in each future period.
The full cost mix is also not disclosed here. Amazon cited memory costs and supply volatility among its risks, but did not specify how much of its capital budget is going to electricity, land, data-center construction, chips or other equipment. The source report gives Amazon’s estimates about customer savings and chip demand, but those company claims are not independently verified in the provided material.
It is also unclear how much the after-hours share decline reflected spending concerns versus the earnings-per-share, advertising and holiday-quarter forecast misses. The source report attributes the move to investor focus on the cash gap and weaker-than-expected parts of the results; it does not provide a breakdown of market participants’ reasons.
Watch Spending and Capacity Delivery
Investors and AWS customers will be watching Amazon’s next quarterly results for evidence that new infrastructure is coming online and supporting continued cloud growth. Key measures include AWS revenue and operating income, capital spending, operating cash flow and free cash flow. Amazon’s stated plan—about $220 billion in 2026 and “meaningfully more” in 2027—means spending levels remain a central issue even if demand continues to expand.
Customers will also be looking for updates on AI capacity availability, chip supply and the timing of booked services. The source report says Amazon plans to sell its Trainium chips outside AWS from late 2027, a longer-term development rather than an immediate response to current capacity constraints. The company has not provided further timing or financial details in the supplied material.
For now, the confirmed picture is a fast-growing AWS business with a substantial contracted backlog, paired with investment and cash outflows that have risen sharply. Whether that spending sustains AWS’s momentum at returns investors find acceptable remains to be seen.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% to $46 billion in July through September, according to Amazon’s results. The source report describes this as the unit’s fastest growth since late 2021.
Why did Amazon’s free cash flow turn negative?
Amazon’s capital spending outpaced its operating cash flow over the trailing 12 months. The company generated $168.3 billion in operating cash flow and spent $210.7 billion on capital investments, leaving free cash flow at minus $42.4 billion.
What does AWS’s $578 billion backlog mean?
It is the value of AWS’s contracted future revenue, according to CEO Andy Jassy. It indicates substantial committed demand, but it is not cash already collected; revenue is recognized as AWS provides the contracted services.
What is Amazon forecasting for capital spending?
Amazon expects capital spending of about $220 billion in 2026 and said it expects to spend “meaningfully more” in 2027. Jassy said most of the 2026 amount is intended for AWS.
Does the report show when Amazon’s investment will pay off?
No. The reported growth and backlog show demand, but the supplied information does not give a timeline for positive free cash flow or quantify when new infrastructure will generate returns sufficient to offset its cost.
Source: ThorstenMeyerAI.com
