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TL;DR
AWS revenue rose 39% to $46.0 billion in the third quarter, its fastest growth since late 2021, while operating income climbed 55%. Amazon spent $75.9 billion on capital investments during the quarter and reported trailing 12-month free cash flow of negative $42.4 billion, as investors weighed the cost and timing of its AI and cloud expansion.
Amazon said AWS revenue rose 39% to $46.0 billion in the third quarter, its fastest growth since late 2021, as the company stepped up investment in cloud and artificial-intelligence infrastructure. But $75.9 billion in quarterly cash capital spending helped push trailing 12-month free cash flow to negative $42.4 billion, and Amazon shares fell more than 6% in after-hours trading on Thursday.
AWS operating income increased 55% to $17.8 billion, according to Amazon’s October 29 earnings release. The company said AWS growth accelerated for a sixth consecutive quarter, with the reported rate rising from 17% in the second quarter of 2025 to 39% in the latest quarter, excluding currency effects. Chief Executive Andy Jassy said AWS’s contracted future revenue, or order book, reached $578 billion, up from $496 billion three months earlier.
Amazon 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 the roughly $220 billion Amazon expects to spend in 2026 will go to AWS. The company had planned about $200 billion in February and raised its outlook in July, citing higher memory prices, according to the supplied account. Amazon expects spending to be “meaningfully more” in 2027.
At the same time, Amazon generated $168.3 billion in operating cash over the past 12 months, up 29%, while capital spending over that period reached $210.7 billion, up 82%. Amazon’s reported trailing 12-month free cash flow was negative $42.4 billion, compared with positive $14.8 billion a year earlier. The source estimates quarterly free cash flow at about negative $33.5 billion using its own arithmetic; that figure is not presented as an Amazon-reported metric.
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 tension between strong demand for cloud services and the cost of preparing capacity to meet it. AWS’s order book grew by $82 billion in one quarter, but contracted revenue is expected to arrive over time, while spending on land, data centers, chips and equipment is paid earlier. That timing gap is central to investors’ concerns about how quickly the build-out will generate cash returns.
The reported share decline also followed earnings per share of $1.89, below analysts’ $1.96 estimate, and advertising results that missed expectations, according to the source’s account of CNBC, LSEG and StreetAccount data. Amazon’s holiday-quarter revenue forecast was also slightly below expectations. The market response therefore reflected more than AWS growth alone: investors were weighing capital intensity alongside results outside the cloud business.
For cloud customers, the company’s investment could affect how much AI computing capacity is available and what it costs. Jassy said large blocks of AI capacity are being reserved well in advance, while short-term access to older AI chips is selling at a premium. Amazon has not disclosed how its spending will translate into customer prices or how quickly new capacity will ease constraints.
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From Cloud Growth to Cash Outlay
The third-quarter acceleration extends a run of faster AWS growth reported since the second quarter of 2025. Revenue growth moved through 17%, 20%, 24%, 28%, 37% and 39%, excluding currency effects, according to the supplied figures. AWS also remains highly profitable on an operating basis, with quarterly operating income of $17.8 billion.
Amazon’s investment is visible in its property and equipment balance, which increased from $357.0 billion at the end of 2025 to $508.9 billion at the end of September, according to the source. Jassy said Amazon was installing an AI accelerator about every 14 seconds. Depreciation and amortization, which spreads the cost of equipment and other assets over time, rose 25% to $20.9 billion in the quarter.
Amazon is also developing its own Trainium AI chips and Graviton processors. Jassy said commitments for the two chip lines had risen more than 20-fold in a year and described the chip business as growing at triple-digit rates. Amazon’s statement that customers saved more than $2 billion in the quarter by using its chips is a company claim, not an independently verified measure in the material provided.
“The $75.9 billion of cash capital spending in the quarter “primarily relates to AWS and AI.””
— Amazon CFO Brian Olsavsky
When Spending Becomes Cash Returns
Amazon has not said how quickly the new data centers and chips will generate revenue or when free cash flow may turn positive again. The $578 billion order book represents contracted future revenue, but the supplied material does not give a schedule for when those contracts will be recognized as sales or how much profit they will produce.
The exact composition of the capital budget is also not fully disclosed. Amazon said spending is primarily tied to AWS and AI, and Jassy said most of the 2026 plan is for AWS, but the company did not provide a detailed breakdown of outlays for power, buildings, chips and other equipment. The source also reports that long-term debt rose from $65.6 billion to $173.1 billion in nine months; it does not establish how much of that change directly financed the build-out.
Amazon’s estimates of customer savings from its chips and Jassy’s comparison of owned infrastructure with rented capacity are company statements. The material provided does not include independent verification of those figures or a full breakdown of customer demand by chip type and contract length.
Amazon’s 2026–27 Spending Path
Investors will be watching Amazon’s next quarterly results for updates on AWS growth, operating income, capital spending and free cash flow. The company’s current outlook calls for about $220 billion in 2026 capital spending and “meaningfully more” in 2027, so future disclosures should show whether that spending pace holds and whether the new capacity is being taken up as planned.
Amazon has also said it plans to sell its Trainium chips outside AWS from late 2027. The supplied material does not specify which customers or markets will be served, or how much revenue the external sales might generate. For now, the clearest indicators of the build-out’s progress will be the reported order book, the pace of AWS revenue growth and whether cash generation begins to catch up with investment.
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, according to Amazon. The company described this as its fastest growth since late 2021.
Why did Amazon shares fall after AWS growth accelerated?
Investors were weighing Amazon’s $75.9 billion quarterly capital spending, negative trailing 12-month free cash flow, an earnings-per-share miss and results and guidance that fell short of expectations in other areas. The supplied source reports a decline of more than 6% in after-hours trading.
What does AWS’s $578 billion order book mean?
It is the amount of contracted future revenue AWS CEO Andy Jassy said the business had secured. It rose from $496 billion three months earlier, but the figure does not show exactly when the revenue will be recognized or how profitable those contracts will be.
How much does Amazon plan to spend on infrastructure?
Amazon expects to spend about $220 billion in 2026, with Jassy saying most will go to AWS. The company said it expects spending to be “meaningfully more” in 2027.
When will Amazon sell Trainium chips outside AWS?
Amazon plans to begin selling its Trainium AI chips outside AWS in late 2027. The company has not provided details in the supplied material about customers, volumes or expected revenue.
Source: ThorstenMeyerAI.com
