Key Points
Amazon (Nasdaq: AMZN) reports third-quarter results Thursday, October 29, after the close — Wall Street expects about $202 billion in revenue and $1.96 a share.
Amazon Web Services grew 37% last quarter to $42.2 billion, its fastest pace in 18 quarters, and is sitting on a $496 billion backlog of signed contracts.
Amazon plans to spend about $220 billion on capital projects in 2026 — and trailing free cash flow has already flipped to a $7.6 billion outflow.
The stock fell 4.57% to $250.38 on Thursday, October 22, in the AI selloff — about 13% below its 52-week high of $287.20.
Amazon has a problem most companies would kill for.
Customers have signed nearly half a trillion dollars of cloud contracts that Amazon can't deliver yet — because it doesn't have enough data centers, chips and electricity to serve them.
CEO Andy Jassy said in July that power capacity will stay short through 2027. Even after raising its 2026 spending plan to roughly $220 billion, Amazon told investors it still won't have enough.
And yet, on Thursday, the stock got hit with everything else in the AI trade. Shares fell 4.57% to close at $250.38 — roughly 13% below the 52-week high of $287.20.
The demand is there. Thursday night, Wall Street finds out whether Amazon can afford to meet it.
The Most Valuable Backlog in Tech
Start with the number that matters most.
In the second quarter, AWS revenue rose 37% to $42.2 billion. That was the fastest growth in 18 quarters, and it pushed the cloud business to a $169 billion annual run rate. On its own, AWS would rank around 24th on the Fortune 500.
AWS operating income hit $16.6 billion, up from $10.2 billion a year earlier — well over half of Amazon's $27.5 billion total, even though AWS brings in only about a fifth of sales.
Behind it sits that $496 billion backlog — contracted work that hasn't come online yet, growing at triple-digit rates. Anthropic alone has committed to spend more than $100 billion on AWS over ten years, securing up to 5 gigawatts of capacity. AWS's AI business and its custom chip business are each running above $25 billion a year.
This is what the robot economy actually runs on: server farms, custom silicon and power — in quantities nobody planned for three years ago.
The $220 Billion Question
Here's where the fear comes in.
Amazon started 2026 planning to spend about $200 billion. In July, it raised that to roughly $220 billion — and the extra $20 billion was driven largely by soaring memory and component prices, not just new capacity.
That spending has wiped out free cash flow. Over the trailing 12 months through June, Amazon generated $161.4 billion in operating cash, up 33%. But after paying for equipment, free cash flow was an outflow of $7.6 billion.
Read that again. One of the most profitable companies on earth is currently spending more than it brings in.
Morningstar says another increase "wouldn't be surprising." If it comes Thursday, investors will want proof Amazon is buying capacity, not just paying more for the same parts.
That same fear hit Thursday, when a rotation out of AI stocks — sparked in part by Meta's spending disclosures — pulled Amazon down with the group.
What Wall Street Expects Thursday
Amazon guided third-quarter sales to $197 billion to $202 billion, up 9% to 12%. That looks like a big slowdown from 20% growth last quarter, but most of it is mechanical. Prime Day moved into the second quarter this year. Amazon says that, excluding the shift, growth would be nearly 4 percentage points higher. Currency is another drag of about 0.8 points.
The profit guide tells a better story. Amazon expects operating income of $22.5 billion to $26.5 billion, compared with $17.4 billion a year ago. HSBC projects about $27 billion — above the top of the range.
Consensus sits at about $202 billion in revenue and $1.96 a share. That means analysts already expect Amazon to land at the top of its own guidance.
For AWS, analysts expect growth of roughly 35% to 37%. HSBC forecasts $45.1 billion in AWS revenue, up 36.8%. But a JPMorgan earnings preview put the buy-side "bogey" at 42%, well above the Street's 37%. That gap between the published estimate and what big funds quietly want is where surprises happen — in both directions.
Then there's margin. AWS posted a 39.4% operating margin last quarter, but that included $551 million of energy-contract gains. The underlying figure was closer to 38% — the level to watch.
Why the Stock Hasn't Kept Up
Amazon has been the laggard of the Magnificent Seven for years. The pattern keeps repeating: strong results, a big spending number, and a selloff.
It happened in February, when Amazon unveiled a $200 billion capex plan and shares dropped nearly 11% after hours despite a solid quarter. In July, AWS accelerated and the stock jumped more than 10% after hours.
So Thursday comes down to one trade-off. If AWS growth holds in the high 30s and management shows the spending is converting into revenue, the backlog becomes the story. If growth slips toward the low 30s while capex climbs again, the cash-burn story takes over.
There's one more wrinkle. Amazon's power constraint is the same one hitting every hyperscaler. Nuclear power just got the green light, but new plants are years away. Until then, the companies that already have power and buildings get the orders.
What Lands Next
Monday, October 26: Verizon before the open; Cadence Design and Nucor after the close.
Tuesday, October 27: Seagate and NXP Semiconductors after the close; September durable goods orders.
Wednesday, October 28: The Fed's rate decision at 2:00 p.m. ET. Futures price roughly a 91% chance of a hold at 3.75%–4.00%, though all 100 economists in a Reuters poll expect a hike in December. Microsoft and Alphabet report after the close.
Thursday, October 29: Third-quarter GDP and September personal income and spending at 8:30 a.m. ET. Amazon and Intel report after the close.
By Thursday night, three of the world's biggest cloud providers will have reported within about 24 hours. Amazon goes last. Whatever Microsoft and Alphabet say about capacity, pricing and spending will set the bar it has to clear.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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