Amazon Earnings Show AWS Momentum
Amazon earnings show accelerating AWS growth and a $578.0 billion contracted backlog, fueling bullish positioning while heavy capex pressures cash flow.
KEY TAKEAWAYS
- AWS net sales rose 39.3% year over year to $46.0 billion.
- Remaining performance obligations totaled $578.0 billion, providing a visible multi-year revenue runway.
- Heavy 2026 capex of $220.0 billion and negative trailing free cash flow weigh on near-term liquidity.
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Amazon.com Inc. (AMZN) reported accelerating growth in its Amazon Web Services (AWS) segment and a surge in contracted backlog in its Oct. 29 earnings call and Oct. 30 Form 10-Q. Management said this backlog supports extended revenue momentum, even as heavy capital spending pressures near-term cash flow.
AWS Growth and Contracted Backlog
Amazon’s Form 10-Q showed AWS net sales for the quarter ended Sept. 30, 2026, rose 39.3% year over year to $46.0 billion, marking the fastest pace of AWS expansion in nearly five years and the sixth consecutive quarter of accelerating growth. The quarter implied an annualized AWS revenue run rate of about $184.0 billion.
The filing reported remaining performance obligations—contracted revenue not yet recognized—of roughly $578.0 billion as of Sept. 30, 2026. These obligations primarily relate to AWS contracts with original terms longer than one year, with a weighted-average remaining life of 6.1 years. This figure rose from about $496.0 billion at June 30 and roughly $200.0 billion a year earlier, reflecting rapid expansion in contracted commitments.
Capital Spending and Outlook
Management forecasted approximately $220.0 billion in capital expenditures for calendar 2026, up from a prior plan of $200.0 billion, and said 2027 spending would be meaningfully higher. Much of the investment targets AI and data-center infrastructure. The company’s trailing-12-month free cash flow swung to negative $42.4 billion from positive $14.8 billion a year earlier, illustrating near-term cash-flow pressure tied to the spending program.
Management said it expects AWS to grow more than 40% in both 2027 and 2028 and could become a $1 trillion-revenue business within five to 10 years. This outlook depends on continued enterprise adoption of core computing and AI workloads, expanded capacity, and ongoing product innovation. Customers are consuming newly available computing capacity nearly as quickly as Amazon installs it, underscoring demand that supports the growth thesis.
The combination of accelerating AWS growth and a sizable contracted backlog gives Amazon a visible revenue runway in the near term. Investors must weigh this against heavy capital expenditures and the resulting cash-flow pressure as the company builds capacity for AI workloads.
