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TL;DR
Amazon reported that AWS revenue climbed 39% in the third quarter, its fastest growth since late 2021, while its contracted future revenue backlog reached $578 billion. The company spent $75.9 billion on capital investments in the quarter and reaffirmed plans to spend about $220 billion in 2026, leaving trailing 12-month free cash flow at negative $42.4 billion. Shares fell more than 6% in after-hours trading as investors weighed the AI opportunity against cash demands and weaker-than-expected results in other areas.
Amazon said AWS revenue rose 39% to $46.0 billion in the third quarter, its fastest pace since late 2021, while the company spent $75.9 billion on capital investments in the same three months. The results put the scale of Amazon’s AI and cloud build-out alongside its returns: AWS operating income rose 55% to $17.8 billion, but Amazon’s trailing 12-month free cash flow fell to negative $42.4 billion, and its shares dropped more than 6% in after-hours trading.
Chief Executive Andy Jassy said AWS had $578 billion in contracted future revenue at quarter-end, up from $496 billion three months earlier. That backlog indicates substantial customer commitments, but it is revenue expected over time rather than cash already received. AWS revenue growth 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 Amazon’s reported figures.
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 capital-spending plan for 2026 is directed to AWS and that the company expects to spend “meaningfully more” in 2027. Amazon raised its 2026 spending plan from about $200 billion in July, citing higher memory prices, according to the source report.
Amazon generated $168.3 billion in operating cash over the 12 months through the quarter, up 29%, while capital spending over that period reached $210.7 billion, up 82%. The resulting 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; that figure is the author’s calculation, not a directly cited company measure.
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 Capacity Comes With a Cash Cost
The results show the trade-off behind Amazon’s cloud expansion: the company is reporting faster AWS growth and a larger backlog while paying for buildings, servers, chips and related equipment well ahead of much of the revenue those assets may generate. The backlog strengthens the case that customers are reserving capacity, but it does not remove the timing risk. Construction and equipment bills arrive before all contracted services are delivered and paid for.
For investors, the immediate question is whether AWS can turn those commitments into sustained revenue and profit quickly enough to justify the investment. Amazon’s quarterly capital spending nearly matched twice the cash generated by the business, according to the source report’s comparison, and spending is expected to rise further. The earnings reaction also reflected concerns beyond AWS: earnings per share of $1.89 missed analysts’ $1.96 estimate, advertising revenue fell short of expectations, and Amazon’s holiday-quarter revenue forecast was slightly below forecasts cited by CNBC.
For cloud customers, the build-out may mean more available AI computing capacity over time, but near-term supply is not uniform. The source report says large blocks of AI capacity are being reserved well in advance and that short-term access to older AI chips is selling at a premium. For shoppers, the results do not establish a direct change to prices or service; Amazon’s retail and advertising performance matters to the broader financial picture, but the reported spending is aimed primarily at cloud and AI infrastructure.
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How Amazon Is Building AWS
Amazon’s investment is visible in its balance sheet: property and equipment rose from $357.0 billion at the end of 2025 to $508.9 billion at the end of September, a roughly $152 billion increase over nine months. Jassy said the company was installing an AI accelerator about every 14 seconds. Depreciation and amortization, which records the cost of assets over time, rose 25% to $20.9 billion in the quarter, reflecting the growing installed base of equipment.
The build-out includes Amazon-designed Trainium AI chips and Graviton processors, as well as data centers and other infrastructure. Jassy said revenue commitments for the company’s chips rose more than 20-fold in a year and described chip growth as triple-digit. Amazon also said customers saved more than $2 billion in the quarter by using its chips; that savings figure is the company’s own claim. The company plans to offer Trainium chips outside AWS from late 2027, according to the source material.
Amazon has argued that owning or securing capacity over the long term can be preferable to renting it from specialist cloud providers. Jassy said renting from “neoclouds” can reduce a cloud provider’s operating margin by about 35 percentage points. That is his competitive argument, not an independently verified industry-wide measure. Amazon also cited memory costs and supply volatility among risks, and announced a $1 billion “Built Together” program for communities near its U.S. data centers, including energy and water-efficiency upgrades.
When Investment Becomes Cash
Amazon has not provided a precise timetable for when its current investment wave will produce cash returns, or how much of the $578 billion backlog will be recognized in each future period. The backlog is a measure of contracted future revenue, not a guarantee that every project will proceed exactly as planned or that the whole amount will become revenue at once.
The company’s spending outlook also carries uncertainty. Amazon cited memory costs and supply volatility, while the source material does not specify how much of the capital budget goes to power or how the planned spending will be divided among data centers, chips and other assets. The quarterly free-cash-flow estimate of negative $33.5 billion is an author calculation; the reported figure available in the source is negative $42.4 billion over 12 months.
It is also unclear how much of the after-hours share decline reflected the spending and cash-flow figures versus the earnings-per-share miss, advertising results and holiday-quarter forecast. The source reports the stock’s fall and those results but does not establish a single cause for the market reaction.
Watch Spending and AWS Returns
Investors will look for Amazon’s next earnings report and further updates on AWS growth, operating income, capital spending and free cash flow. The key test is whether new capacity is brought into service and supports revenue and profit growth while the company continues to spend at the planned pace. Amazon has said its 2026 capital spending will be about $220 billion and expects a higher amount in 2027.
Customers and competitors will also be watching the availability of AI capacity, the rollout of Amazon’s chips and the company’s plan to sell Trainium outside AWS from late 2027. Amazon has not given a detailed schedule or financial forecast for that external offering in the supplied material. Its next disclosures should clarify how quickly infrastructure is being deployed and whether the backlog is translating into recognized sales.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% to $46.0 billion in July through September 2026. Amazon described this as its fastest growth since late 2021.
Why is Amazon spending so much?
Amazon said its $75.9 billion in quarterly capital spending primarily related to AWS and AI. The investments include data centers, computing equipment and Amazon-designed chips.
What does AWS’s $578 billion backlog mean?
It is the value of contracted future revenue cited by Andy Jassy, up from $496 billion three months earlier. It represents commitments to be delivered over time, not cash already collected or revenue recognized immediately.
Why did Amazon shares fall after the results?
Shares fell more than 6% in after-hours trading. The results included sharply higher spending and negative trailing 12-month free cash flow, as well as an earnings-per-share miss, weaker-than-expected advertising results and a holiday-quarter revenue forecast slightly below expectations. The available source does not isolate one cause for the decline.
Is Amazon’s free cash flow negative?
Yes. Amazon’s free cash flow for the 12 months through the third quarter was negative $42.4 billion, compared with positive $14.8 billion a year earlier. The source separately estimates the quarter-only figure at about negative $33.5 billion, based on its own arithmetic.
Source: ThorstenMeyerAI.com
