Market Flux Event
Amazon Q3 Miss and Negative $42.4B Free Cash Flow as AI Capex Hits $77.3B in a Single Quarter
Read this in the Market Flux appAmazon reported third-quarter earnings and revenue that missed Wall Street expectations, sending shares down more than 6% in after-hours trading. Earnings per share came in at $1.89 against an estimated $1.96, and revenue reached $201.94 billion versus a $202.31 billion consensus. Capital expenditures for the quarter alone hit $77.3 billion, far exceeding expectations, and drove free cash flow to negative $42.4 billion for the trailing twelve-month period, a swing of 386% year over year.
Amazon Web Services was a bright spot, generating $45.98 billion in revenue against a $45.29 billion estimate. CEO Andy Jassy disclosed that the AWS backlog now stands at $578 billion, growing at a triple-digit rate year over year, and said AI revenue across AWS is also growing at a triple-digit annual pace. Inference already accounts for well over half of AWS's AI revenue and is growing. Jassy expressed confidence that AWS could become a $1 trillion business, describing the current moment as a "once-in-a-lifetime" AI opportunity.
On capital spending, Amazon held its full-year 2026 capex forecast at $220 billion and said spending would be "meaningfully more" than that figure in 2027. Jassy said he has "even more conviction" that AWS investments will generate strong returns on invested capital over a multi-year horizon, with AWS revenue growth expected to exceed 40% in both 2027 and 2028.
Amazon also announced plans to sell its Trainium AI chips outside of AWS beginning in late 2027, citing strong customer demand. Jassy said the company expects to build "a very significant business" from external chip sales, noting that while internal use of Trainium generates more total revenue and free cash flow over a five-to-six year period, external sales produce revenue immediately.
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Sources
- PolymarketJUST IN: Amazon reveals it spent over $77,000,000,000.00 on AI infrastructure & other capital investments in Q3, far exceeding Wall Street expectations.
- FirstSquawkAMAZON CEO SAYS THE AWS BACKLOG IS $578 BLN, GROWING TRIPLE DIGITS YOY, AND THAT THE COMPANY EXPECTS TO SPEND “MEANINGFULLY MORE” ON CAPEX IN 2027
- WallstengineAmazon $AMZN CEO Andy Jassy on AWS investments and long-term returns: “...have even more conviction than we already had that the investment we're making in AWS will yield a much larger revenue and free cash flow generating business than we would have imagined a couple years ago, with strong return on invested capital.” Jassy says AWS's flywheel is strengthening as existing cloud customers drive AI inference demand, which in turn fuels more core AWS usage. “This is a different model than primarily hosting GPUs or renting short-term data center capacity.” He expects AWS revenue to grow more than 40% in both 2027 and 2028.
- BenzingaOpenAI CEO Sam Altman says society may need to agree on limits to how intelligent individual AI models become, even if it slows progress. He believes AI could eventually make major breakthroughs in AI research. (Via @jaynitx, Original source: @stripe)
- Business InsiderAmazon CEO sees AI spending 'meaningfully' higher in 2027
- BusinessInsiderAmazon says it will spend "meaningfully more" than $220 billion on AI infrastructure in 2027, even as its free cash flow turns sharply negative.
- Seeking AlphaAmazon sees AWS becoming a $1T business amid 'once-in-a-lifetime' AI opportunity