Amazon’s cloud arm just posted its fastest growth in almost five years, and investors still sold the stock. The reason is a number further down the page: the money Amazon is pouring into AI data centers.
The numbers
- Amazon Web Services revenue rose 39% to about $46 billion in the quarter ended Sept. 30, with annualized sales near $184 billion.
- Total sales were $201.9 billion, up 12%.
- Net income was $20.7 billion, or $1.89 a share, a bit under the roughly $1.96 analysts expected. Last year’s quarter had a $9.5 billion pre-tax gain from Anthropic investments that did not repeat.
- AWS’s contracted backlog reached $578 billion, more than double a year earlier.
Why the stock fell anyway
Spending on property and equipment hit $77.3 billion in the quarter, nearly $20 billion above what analysts expected. Amazon plans about $220 billion in capital spending for 2026, and CEO Andy Jassy said 2027 will be “meaningfully more.”
That spending shows up in cash flow. Over the past 12 months Amazon’s free cash flow, the cash left after running the business and buying equipment, swung to an outflow of $42.4 billion, versus an inflow of roughly $14.8 billion a year earlier. Shares fell more than 7% in after-hours trading.
What to watch next
Amazon guided fourth-quarter sales to $240 billion to $247 billion, up 12% to 16%, with operating income of $28.5 billion to $33.5 billion. Advertising is expected to grow in the high teens.
What it means for regular investors
If you own an index fund, you already hold Amazon and the other big spenders. The question markets are asking is whether record AI spending turns into matching profit, and the answer will take years, not quarters.
- Strong growth and heavy spending can both be true. Judge each company on both.
- A big backlog is a promise of future revenue, not cash in hand.
- After a drop like this, resist trading on one headline. Check how much of your portfolio sits in a handful of tech names.
This is general information, not investment advice.
Earlier on Contoh we covered Anthropic’s reported quarter, one of the AI customers behind this cloud demand.
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