Amazon Reports AWS Growth Amid Massive AI Infrastructure Spending
Amazon prioritizes AI hardware investment despite cash flow shifts and market expectations.
1Financial Performance Overview
Amazon reported Q3 revenue of $201.9 billion, marking a 12% increase. Operating income reached $28.1 billion, up from $17.4 billion in the previous year. Despite these gains, the company missed analyst forecasts for revenue and earnings per share, leading to a 7% decline in share price during extended trading sessions.
2AWS Growth Trajectory
Amazon Web Services revenue surged 39% to $46 billion, with operating income climbing to $17.8 billion. The cloud unit currently maintains an annual revenue run rate of $184 billion and a substantial backlog of $578 billion. CEO Andy Jassy projects AWS revenue growth exceeding 40% throughout both 2027 and 2028.
3Aggressive AI Capital Expenditure
Property and equipment purchases reached $94.8 billion over the last 12 months, primarily driven by AI infrastructure. Amazon spent $77.3 billion in Q3 alone, compared to $35.1 billion a year prior. The company maintains its annual cash capital spending target of $220 billion, supported by $48.1 billion in new long-term debt.
4Hardware Strategy and Debt
Amazon is installing AI accelerators every 14 seconds to meet surging customer demand. To support this hardware acquisition, the company secured the ability to borrow up to $80 billion against its AI assets. By late 2027, Amazon plans to commercialize its proprietary Trainium AI chips for external customers beyond AWS.
5Retail and Advertising Performance
The retail segment experienced slower growth, with online store sales rising only 2% to $68.5 billion. Advertising revenue increased 11% to $19.6 billion. The shift of Prime Day into the second quarter negatively impacted total growth by approximately four percentage points, though Prime Video remains profitable with a multi-billion dollar run rate.
6Cash Flow Dynamics
Free cash flow dropped to negative $42.4 billion over the 12 months ending in September, a significant shift from the positive $14.8 billion reported a year earlier. This decline is directly attributed to the massive capital allocation toward AI infrastructure, which the company views as a necessary investment for future returns.
7Future Spending Outlook
CEO Andy Jassy confirmed that Amazon expects to spend meaningfully more on AI infrastructure in 2027. The company maintains a clear line of sight regarding attractive returns on these investments. For the upcoming holiday quarter, Amazon forecasts revenue between $240 billion and $247 billion, with operating income reaching up to $33.5 billion.
8Strategic Long-term Vision
Amazon is positioning itself to potentially manage two trillion-dollar revenue businesses within the next five to ten years. By integrating tools like TorchNeuron for Trainium, the company is building a comprehensive ecosystem for developers. This strategy underscores a transition toward becoming a dominant hardware-software provider in the global AI computing market.
Original article: The Next Web — Amazon Reports AWS Growth Amid Massive AI Infrastructure Spending