Amazon’s cloud business is growing faster than it has in almost five years, but the company still came in slightly below Wall Street’s targets. In its third-quarter results on Thursday, October 29, Amazon reported revenue of $201.9 billion, up 12%, and AWS sales of $46.0 billion, up 39%, according to Amazon’s earnings release.
The cloud story. AWS operating income was $17.8 billion, up from $11.4 billion a year earlier. Reports on the earnings call said AWS has an annualized run rate of about $184 billion and a backlog of $578 billion. TechCrunch reported that CEO Andy Jassy said AWS could become a $1 trillion business, but that it will spend heavily first. That is a long-range forecast and not a current figure.
Why it was called a miss. Earnings per share were $1.89, below the $1.96 analysts expected, and revenue of $201.94 billion was narrowly under an estimate of $202.20 billion, according to a summary by 24/7 Wall St. Amazon says Prime Day moved into the second quarter for most large countries, which it says reduced third-quarter growth by about 400 basis points. Net income was $20.7 billion, down from $21.2 billion, though the year-earlier quarter included $9.5 billion in pre-tax gains from Anthropic investments.
The rest of the business. North America sales were $112.9 billion, up 6%, and international sales were $43.1 billion, up 5%. Advertising services brought in $19.6 billion, up 11%. Operating income overall was $28.1 billion, which Amazon describes as its highest margin ever at 13.9%.
The cost of the AI race. Amazon expects to spend about $220 billion on capital expenditures in 2026, and its free cash flow over the trailing twelve months was an outflow of $42.4 billion, driven by higher spending on property and equipment, mainly for AI. Operating cash flow rose 29% to $168.3 billion. Those numbers show why investors watch AI spending so closely: the revenue is arriving, but so are the bills.
Other announcements. Amazon listed AWS agreements with companies including Meta, NVIDIA and OpenAI, new model options and managed agents in its Bedrock AI service, and the acquisition of DuckLabs, the company behind the DuckDB database. It also said its Zoox robotaxis offer paid rides in Las Vegas and operate in 12 US cities, and that its Amazon Leo satellite service is due to begin initial service later this year, with an agreement with AT&T. The company plans to hire more than 300,000 seasonal and other workers for the holiday season.
The outlook. For the fourth quarter, Amazon guided to net sales of $240.0 billion to $247.0 billion, up 12% to 16%, and operating income of $28.5 billion to $33.5 billion. It expects advertising revenue growth in the high teens.
What to watch. The key question is whether AWS can keep growing at this pace while spending at this level, and how much of the backlog turns into revenue. For readers in the US and UK, where companies are choosing between cloud providers for AI workloads, the numbers suggest Amazon is holding its ground against Microsoft and Google, whose recent results also showed strong cloud growth.
Sources: Amazon, TechCrunch and 24/7 Wall St. Figures are as reported by Amazon and those outlets.
Amazon Spheres in Seattle (file image), Wikimedia Commons, CC BY-SA 4.0
