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TL;DR
Amazon said AWS revenue grew 39% in the third quarter, its fastest rate since late 2021, while operating income rose 55%. The company spent $75.9 billion on capital investment during the quarter and reported trailing 12-month free cash flow of negative $42.4 billion, as it funds an expanding data-center and AI build-out.
Amazon’s AWS revenue rose 39% in the third quarter, its fastest growth rate since late 2021, while the company spent $75.9 billion on capital investment in three months as it expands data centers and AI capacity. Amazon also reported negative $42.4 billion in free cash flow over the 12 months through September, putting the cost and timing of its infrastructure build-out at the center of investor attention.
AWS generated $46.0 billion in revenue for the July-to-September quarter, and its operating income increased 55% to $17.8 billion, according to Amazon’s October 29 earnings release. The company said AWS growth has accelerated for six consecutive quarters, from 17% to 39% since the second quarter of 2025, excluding currency effects. The latest rate is the fastest since the end of 2021.
Chief Financial Officer Brian Olsavsky said the quarter’s $75.9 billion in cash capital spending primarily related to AWS and AI. Chief Executive Andy Jassy said most of Amazon’s roughly $220 billion spending plan for 2026 would go to AWS. The company had raised that plan from about $200 billion in February, citing higher memory prices, according to the source material. Amazon expects spending to be “meaningfully more” in 2027.
Amazon’s trailing 12-month operating cash flow was $168.3 billion, up 29%, while capital spending over that period reached $210.7 billion, up 82%. The resulting free cash flow was negative $42.4 billion, compared with positive $14.8 billion a year earlier. The source’s estimate for quarterly free cash flow, about negative $33.5 billion, is its own calculation rather than a figure identified as Amazon’s reported measure. Amazon’s long-term debt rose from $65.6 billion to $173.1 billion over the first nine months of 2026, according to the supplied 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 show a widening gap between near-term infrastructure costs and the revenue Amazon expects to collect over time. Data centers, chips and related equipment require cash before all the capacity is operating and producing billable cloud services. Amazon’s figures show that its operating business generates substantial cash, but its current investment pace exceeds that cash generation when measured against capital spending.
For cloud customers, the build-out matters because access to computing capacity can affect how quickly they can train or run AI models. Jassy said AWS has $578 billion in contracted future revenue, up from $496 billion three months earlier, and described strong demand for AI capacity. Those contracts indicate commitments for future business, but the supplied information does not specify when the revenue will be recognized or how much of the order book relates to AI.
Investors also weighed results beyond AWS. The source material says earnings per share of $1.89 fell short of the $1.96 analyst estimate, advertising missed expectations, and Amazon’s holiday-quarter revenue forecast was slightly below forecasts. Amazon shares fell more than 6% in after-hours trading, according to the source. That market reaction reflects investor expectations and concerns about cash investment; it does not establish whether the spending will ultimately earn an adequate return.
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From Cloud Growth to Cash Outlay
The spending plan reflects a sharp increase in Amazon’s investment pace. In February, the company had planned about $200 billion in 2026 capital spending; it raised that estimate in July, with higher memory prices cited as one reason. The third-quarter cash spending figure was $75.9 billion. Separately, Amazon’s property and equipment rose from $357.0 billion at the end of 2025 to $508.9 billion at the end of September, a balance-sheet increase of about $152 billion over nine months. That asset increase is not the same measure as cash capital spending.
Amazon is investing in facilities and equipment as well as its Trainium AI chips and Graviton processors. Jassy said the company was installing an AI accelerator about every 14 seconds and that commitments for its chips 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 estimate. Depreciation and amortization, which records asset costs over time, rose 25% to $20.9 billion in the quarter.
Amazon’s argument for owning or leasing infrastructure long-term is that it can control capacity and economics rather than rely on outside providers. Jassy said renting capacity from specialized cloud providers can reduce operating margins by about 35 percentage points. That is his characterization, not an audited comparison presented in the supplied material. Amazon also said it plans to offer Trainium chips outside AWS from late 2027.
““Primarily relates to AWS and AI.””
— Amazon CFO Brian Olsavsky
Returns and Cash Timing Remain Open
The results do not show how quickly Amazon’s new infrastructure will become productive, how much revenue or profit it will generate, or when free cash flow might recover. The $578 billion AWS order book is a measure of contracted future revenue cited by Jassy, but the supplied information gives no detailed schedule for delivery, billing or recognition. It also does not break out the share tied specifically to AI.
Amazon’s capital-spending outlook remains large, but the precise amount and timing can change. The company cited memory supply volatility and energy prices among its risks, and the source does not quantify how much of the latest spending went to power infrastructure. The reasons behind the after-hours share decline cannot be established from the share move alone; the source links it to spending, cash flow and weaker-than-expected results in other areas.
Watch Spending and AWS Conversion
Investors and customers will look to Amazon’s next quarterly results for updates on AWS growth, capital spending and free cash flow, as well as whether the company maintains its 2026 investment outlook. The key financial test is whether newly installed capacity begins generating revenue and operating income at a pace that supports the cash outlay.
Amazon has also said it plans to make Trainium available outside AWS from late 2027. Further detail on that rollout, customer adoption and the timing of contracted AWS demand could clarify how the chip strategy fits into the company’s wider investment plan. Until then, the scale of future returns remains uncertain.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% to $46.0 billion in July through September 2026, according to Amazon. The company described that as its fastest growth since late 2021.
How much did Amazon spend on capital investment?
Amazon spent $75.9 billion in cash capital spending in the third quarter. Its stated plan for 2026 was about $220 billion, with most of that amount expected to go to AWS, according to CEO Andy Jassy.
Why was Amazon’s free cash flow negative?
Over the 12 months through September, Amazon generated $168.3 billion in operating cash flow and spent $210.7 billion on capital investment. The difference left free cash flow at negative $42.4 billion, as investment spending rose faster than operating cash flow.
What does AWS’s $578 billion order book mean?
Jassy said AWS had $578 billion in contracted future revenue, up from $496 billion three months earlier. The supplied information does not give a detailed delivery or revenue-recognition schedule, or the portion of the total tied to AI.
When could Amazon sell Trainium chips outside AWS?
Amazon said it plans to offer its Trainium AI chips outside AWS from late 2027. The details of availability and customer adoption have not yet been provided in the supplied material.
Source: ThorstenMeyerAI.com
