Amazon reported third-quarter results on Thursday evening, and once again the big story was AWS, its cloud unit. According to reports, AWS revenue grew 39.3% to about $46 billion, its fastest growth in nearly five years and above analyst expectations. The unit's operating income reached $17.8 billion, compared with $11.4 billion a year earlier.
A $578 billion backlog
AWS's backlog, contracts customers have already signed, rose to $578 billion, more than double a year ago. Amazon CEO Andy Jassy said he expects AWS to grow more than 40% in both 2027 and 2028. Company-wide revenue reached $201.9 billion, up 12%, and the operating margin, 13.9%, was the highest in its history.
Why the stock fell
Even so, the stock fell about 6% to 7% in after-hours trading. Earnings per share of $1.89 were slightly below the $1.96 analysts expected, and trailing 12-month free cash flow sank to minus $42.4 billion. Amazon reiterated its forecast of about $220 billion in capital spending this year. Just as with Google a day earlier, the market rewards cloud growth but punishes spending that outruns cash.
The Israeli angle
A central part of Amazon's plan to make AI cheaper is its Trainium chips, developed at Annapurna Labs, the Israeli chip company Amazon bought in 2015. As AWS grows, so does the weight of that Israeli R&D center.
