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TL;DR
AWS revenue grew 39% to $46 billion in the third quarter, its fastest rate since late 2021, and its contracted future revenue backlog reached $578 billion. Amazon spent $75.9 billion on capital projects during the quarter and reported trailing 12-month free cash flow of minus $42.4 billion; its shares fell more than 6% in after-hours trading.
Amazon Web Services revenue rose 39% in the third quarter to $46 billion, its fastest growth since late 2021, as Amazon reported a $578 billion backlog of contracted future revenue. The company also spent $75.9 billion on capital projects in the quarter, and its trailing 12-month free cash flow turned negative at $42.4 billion; Amazon shares fell more than 6% in after-hours trading.
The quarter ended in September marked the sixth consecutive quarter of faster AWS growth, according to Amazon’s results. Growth rates rose from 17% to 20%, 24%, 28%, 37% and then 39% over that run, excluding currency effects. AWS operating income climbed 55% to $17.8 billion, showing that the cloud unit remained highly profitable even as Amazon stepped up investment.
Chief Executive Andy Jassy said AWS’s contracted future revenue reached $578 billion, up from $496 billion three months earlier. That backlog indicates demand for services already covered by customer commitments, but it is not revenue Amazon receives immediately: the contracts are fulfilled and paid over time. The company has not provided a schedule showing when the full backlog will convert to sales.
Amazon reported $75.9 billion in cash capital spending for the quarter, primarily related to AWS and artificial intelligence, Chief Financial Officer Brian Olsavsky said. Jassy said most of the roughly $220 billion Amazon expects to spend in 2026 will go to AWS, and the company expects spending to be “meaningfully more” in 2027. Amazon had raised its 2026 plan from about $200 billion in July, citing higher memory prices, CNBC reported.
Amazon’s trailing 12-month free cash flow was minus $42.4 billion, compared with positive $14.8 billion a year earlier. Over the same period, operating cash flow rose 29% to $168.3 billion, while capital spending increased 82% to $210.7 billion. The source’s estimate of roughly $33.5 billion in negative free cash flow for the quarter is its own calculation, not a separately reported Amazon figure. Long-term debt rose from $65.6 billion to $173.1 billion during the first nine months of 2026.
The results were mixed beyond AWS. Amazon reported earnings per share of $1.89, below the $1.96 analysts expected, while advertising revenue also missed expectations, according to CNBC’s account of analyst data. Its revenue forecast for the holiday quarter came in slightly below expectations. The combination of a strong cloud business and weaker-than-expected metrics elsewhere accompanied the after-hours share decline.
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 Scaling AWS Capacity
The figures put a concrete price on Amazon’s effort to meet demand for cloud computing and AI services. Customers are committing to future AWS capacity, but data centers, servers, networking equipment and chips must be purchased or installed ahead of the revenue they generate. That timing mismatch helps explain how a fast-growing, profitable cloud division can coexist with negative company-wide free cash flow.
For cloud customers, the investment could mean more available computing capacity over time, but supply remains a near-term constraint. Jassy said large blocks of AI capacity are reserved well in advance and that short-term capacity on older AI chips sells at a premium. The company’s spending plans are not a guarantee that every customer will get the capacity they want, or that prices will fall; Amazon has not quantified the effect of the build-out on customer pricing.
For investors, the central question is whether future earnings from the new infrastructure will justify its upfront cost. Amazon says the demand is supported by contracts, while its current cash figures show the strain of building before that revenue arrives. Its capital expenditure also includes assets whose costs are recognized across years: depreciation and amortization rose 25% to $20.9 billion in the quarter, according to the source material.
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From Cloud Growth to Capital Spending
AWS is Amazon’s cloud computing business, selling companies access to computing, storage and AI-related services. Its revenue growth had been accelerating since the second quarter of 2025, according to the reported series, while its operating income grew faster than revenue in the latest quarter. The $578 billion backlog is a measure of contracted future sales, not cash collected or guaranteed profit.
Amazon says the build-out includes data centers and equipment as well as its own chips, including Trainium AI accelerators and Graviton processors. Jassy said Amazon was installing an AI accelerator about every 14 seconds and that commitments for its chips had risen more than 20-fold in a year. Those are statements by the company; Amazon also said customers saved more than $2 billion in the quarter by using its chips, a company estimate rather than an independently verified figure.
Jassy has argued that owning or securing infrastructure for the long term can be more profitable than renting capacity from specialist providers. He said renting could reduce operating margins by about 35 percentage points compared with owned capacity. That is Amazon’s competitive argument, not an audited comparison. Amazon also cited higher memory costs and risks from energy prices and supply volatility, and announced a $1 billion “Built Together” commitment for communities near its U.S. data centers.
““Meaningfully more””
— Andy Jassy, Amazon chief executive
Backlog, Costs and Returns
Amazon has not disclosed how quickly the $578 billion backlog will be recognized as revenue, how much of it relates specifically to AI, or what margins the contracted work will produce. The backlog supports the company’s account of demand, but does not by itself establish the investment’s eventual return.
The exact allocation of the $75.9 billion in quarterly spending among AWS, AI, retail infrastructure, power and other projects is also not fully itemized in the source material. Amazon has cited memory and energy costs but has not said how much of its capital budget is attributable to either. The full impact of added infrastructure on customer availability and pricing remains uncertain.
It is also unclear how long free cash flow will remain negative or how Amazon will finance the planned increase in spending. The reported rise in long-term debt is a point-in-time comparison, not evidence by itself of why the debt changed. The earnings release and call do not settle whether the market’s after-hours reaction reflects concern mainly about investment costs, the other quarterly misses, the holiday forecast, or a combination.
The Holiday Quarter and 2027 Build
Investors and customers will next look for Amazon’s holiday-quarter results and updates on AWS growth, capacity availability and spending. Amazon’s holiday revenue forecast was slightly below analyst expectations, according to the source material, making delivery against that outlook a near-term measure of performance outside AWS as well as within it.
The company has said it expects to spend about $220 billion in 2026 and “meaningfully more” in 2027. Future results should show whether that spending continues to translate into AWS revenue and operating income, and whether it further pressures free cash flow. Amazon also said it plans to sell its Trainium chips outside AWS from late 2027; the timing and commercial scale of that effort remain prospective.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue increased 39% year over year to $46 billion for the July-to-September quarter. Amazon described it as the fastest pace since late 2021.
Shares fell more than 6% in after-hours trading. The results paired strong AWS growth with heavy spending and negative free cash flow, while earnings per share, advertising and the holiday-quarter revenue forecast were below expectations cited in the source material. The precise reasons for the market move have not been established.
What does AWS’s $578 billion backlog represent?
It is AWS’s reported value of contracted future revenue, up from $496 billion three months earlier. It is not cash already collected, and Amazon has not provided a timetable for when the full amount will be recorded as revenue.
How much is Amazon spending on infrastructure?
Amazon reported $75.9 billion in cash capital spending during the third quarter. It expects about $220 billion for 2026 and has said it expects to spend “meaningfully more” in 2027.
Does the spending mean AWS capacity will become cheaper?
Not necessarily. Amazon is adding capacity, but Jassy said large AI capacity blocks are reserved well ahead and short-term capacity on older AI chips sells at a premium. The company has not quantified how its investment will affect customer prices.
Source: ThorstenMeyerAI.com
