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TL;DR
Amazon said AWS revenue grew 39% in the third quarter, its fastest rate since late 2021, and its contracted future revenue reached $578 billion. At the same time, cash capital spending reached $75.9 billion for the quarter and free cash flow over the trailing 12 months fell to minus $42.4 billion; Amazon shares dropped more than 6% in after-hours trading.
Amazon reported 39% third-quarter revenue growth at Amazon Web Services on Thursday, the cloud unit’s fastest pace since late 2021, while its cash capital spending reached $75.9 billion for the quarter. Trailing 12-month free cash flow turned to minus $42.4 billion, and Amazon shares fell more than 6% in after-hours trading as investors weighed strong cloud demand against the cost of expanding data centers and buying AI hardware.
AWS revenue rose to $46.0 billion in the July-to-September quarter, according to Amazon’s earnings release. The company said growth accelerated for a sixth consecutive quarter, from 17% in the second quarter of 2025 to 39% in the latest quarter, excluding currency effects. AWS operating income increased 55% to $17.8 billion.
Amazon Chief Executive Andy Jassy said AWS’s contracted future revenue, or backlog, rose to $578 billion, from $496 billion three months earlier. The $82 billion increase points to substantial customer commitments, but the contracts are expected to produce revenue over time, rather than immediately. Amazon did not provide a schedule for when the backlog will be recognized as sales.
Chief Financial Officer Brian Olsavsky said quarterly cash capital spending of $75.9 billion primarily related to AWS and AI. Jassy said most of Amazon’s roughly $220 billion planned capital spending for 2026 is directed to AWS, and the company expects spending to be “meaningfully more” in 2027. The source account says 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 increased 25% to $20.9 billion in the quarter, reflecting the cost of assets being spread across their useful lives.
Amazon generated $168.3 billion in operating cash over the trailing 12 months, up 29%, while capital spending over the same period reached $210.7 billion, up 82%. The resulting trailing free cash flow was minus $42.4 billion, compared with positive $14.8 billion a year earlier. The source estimates quarterly free cash flow at about minus $33.5 billion; that is an author calculation, not a figure presented as an Amazon-reported measure in the supplied account.
The earnings report also included weaker-than-expected results on some measures. Amazon’s earnings per share of $1.89 missed the $1.96 analyst estimate, according to the source, citing CNBC, LSEG and StreetAccount data. Advertising revenue also missed expectations, and the company’s forecast for holiday-quarter revenue was slightly below expectations. Those results contributed to the market reaction, alongside concern about the size and timing of investment returns.
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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AI Demand Meets the Cash Bill
The report captures a central tension in the cloud and AI build-out: customer commitments are rising, but the facilities, power and computing equipment needed to serve them require large payments before all the contracted revenue arrives. Amazon’s $578 billion backlog supports the case that demand is substantial, but it does not by itself show how quickly the company will convert those commitments into cash or what margins they will earn.
For investors, the immediate issue is not simply whether AWS is growing. It is whether that growth can produce returns that justify record-scale capital spending, while costs such as memory, electricity and depreciation rise. Amazon remains a large cash-generating business, but the gap between operating cash and capital spending has widened, leaving less free cash after investment and increasing the importance of execution.
For businesses buying cloud services, the investment could mean more available capacity and more options for running AI workloads, including on Amazon’s own chips. The near-term picture is not uniform: the source account says large blocks of AI capacity are being reserved well ahead of time and that short-term capacity on older AI chips is selling at a premium. Amazon shoppers may also watch whether the company’s investment and earnings pressures affect retail priorities, but the supplied information does not establish any change to prices, service or product availability.
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How Amazon’s AI Build-Out Grew
Amazon’s spending plan has increased during 2026. The supplied account says the company had planned about $200 billion in capital spending in February, then raised its estimate in July, citing higher memory prices. It now expects about $220 billion for 2026 and “meaningfully more” the following year. Those are company forecasts, not final spending totals.
The investment includes data centers, equipment and Amazon-designed chips. Jassy said Amazon installs an AI accelerator about every 14 seconds and described rapid growth in its Trainium AI chips and Graviton processors. Amazon said customers saved more than $2 billion in the quarter by using its chips; that is a company claim, not an independently verified figure in the supplied material. The company plans to sell Trainium chips outside AWS starting in late 2027.
Amazon also argues that owning or securing capacity for the long term can be more attractive than renting it from specialist cloud providers. Jassy said a cloud provider that rents from such firms earns about 35 percentage points less operating margin. That comparison is his argument, rather than an audited industry measure. The source account also notes Amazon’s announcement of $1 billion for communities near U.S. data centers, including energy and water-efficiency upgrades.
When Spending Pays Back
The report does not specify when the $578 billion backlog will turn into revenue, how much of it relates to AI, or the margins expected on those contracts. It also gives no precise breakdown of quarterly spending among data centers, chips, power and other equipment. Amazon has cited memory costs and supply volatility as risks, but the supplied account does not quantify their effect on project costs or timelines.
It is also unclear how much of the spending will be financed through operating cash, new borrowing or other sources over the coming quarters. The source says long-term debt rose from $65.6 billion to $173.1 billion in nine months, but does not provide enough detail here to connect that change directly to particular investments. The company’s forecasts may change, and the supplied information does not establish whether the after-hours share-price decline continued in regular trading.
Watch Cash Flow and Capacity
Investors will look to Amazon’s next quarterly results for updated AWS growth, capital spending, free cash flow and guidance on the 2027 investment plan. Progress in turning contracted demand into recognized revenue—and ultimately operating cash—will help show whether the build-out is keeping pace with customer use.
Customers and investors will also be watching for details on AI capacity availability, chip deployment and supply constraints, including memory and energy. Amazon’s stated plan to begin selling Trainium outside AWS in late 2027 is a later milestone. Until the company provides more detail, the timing and financial returns of its current investments remain open questions.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% to $46.0 billion in the July-to-September quarter. Amazon said it was the unit’s fastest growth rate since the end of 2021.
Why did Amazon shares fall after the report?
Shares fell more than 6% in after-hours trading. The supplied account points to concern about heavy spending and negative free cash flow, along with earnings per share, advertising revenue and holiday-quarter revenue guidance that were below expectations.
What does Amazon’s $578 billion AWS backlog mean?
It is the value of contracted future revenue that Jassy said AWS had secured. The figure rose from $496 billion three months earlier, but the supplied information does not say when the contracts will be recognized as revenue.
Is Amazon’s free cash flow negative?
Yes, on a trailing 12-month basis it was minus $42.4 billion, compared with positive $14.8 billion a year earlier. Amazon generated $168.3 billion in operating cash over the period and spent $210.7 billion on capital investment, according to the supplied account.
What is Amazon expected to spend on infrastructure?
Amazon expects about $220 billion in capital spending in 2026 and has said spending in 2027 will be “meaningfully more.” Jassy said most of the 2026 plan is for AWS; the company has not provided a specific 2027 total in the supplied material.
Source: ThorstenMeyerAI.com
