Amazon’s third-quarter purchases of property and equipment topped $77 billion, well beyond analysts’ estimates, amid its data-centre buildout for AI demand, Bloomberg reported on 29 October. The spending led to a $42.4 billion free cash outflow. The figures came with Amazon’s third-quarter results, which also showed revenue rising 12% to $201.9 billion.
Key points
- Third-quarter property and equipment spending exceeded $77 billion and led to a $42.4 billion free cash outflow.
- Amazon raised its 2026 capital expenditure guidance in July to $220 billion from $200 billion.
- Amazon Web Services sales accelerated for a sixth consecutive quarter.
- Amazon shares opened down 3.81% on 29 October, before the results were released.
Amazon’s $220 billion spending plan
Amazon had raised its 2026 capital expenditure guidance to $220 billion from $200 billion in July, citing higher memory costs as it increased AI-related spending, Seeking Alpha reported. The company’s data centre construction is intended to support demand for AI services delivered through Amazon Web Services, its cloud business.
The third-quarter outlay put cash flow at the centre of the earnings discussion. Amazon’s free cash flow over the trailing 12 months stood at negative $7.6 billion in the second quarter, Investor’s Business Daily reported ahead of the results. Analysts had projected that the trailing outflow could widen to $10 billion in the third quarter. The analysts’ forecast concerned trailing 12-month free cash flow, while Bloomberg reported a $42.4 billion free cash outflow.
Before Amazon reported, Seeking Alpha analyst Justin Purohit said management expected eventual returns from its investment but also expected the spending to weigh on free cash flow in the near term. Jefferies offered a different emphasis: it said growing backlogs, cloud pricing power and the e-commerce business reduced its concerns about the capital expenditure burden, even as it expected future spending to rise.
AWS accelerates alongside Azure and Google Cloud
Sales at Amazon Web Services accelerated for the sixth consecutive quarter, according to Bloomberg. Before the release, analysts surveyed by FactSet had projected 37% sales growth for the cloud unit, Investor’s Business Daily reported. BofA Securities analyst Justin Post had said growth could reach 40%, citing price increases, growing contacts with AI labs including OpenAI and Anthropic, and demand from businesses using AI.
Amazon’s cloud competitors had reported their September-quarter figures on 28 October. Google Cloud revenue rose 103% to $30.7 billion, against a forecast for 89% growth, while Microsoft’s Azure revenue increased 48%, above a consensus estimate of 44.3%. AI Affairs has separately reported Microsoft’s disclosure of $33.2 billion in quarterly Azure revenue.
Post viewed the Microsoft and Google results as encouraging for AWS sales. He expected additional capacity to support Amazon’s cloud growth, while judging that Google’s acceleration, which benefited from chip sales, would probably exceed AWS’s. Those assessments preceded Amazon’s third-quarter release.
Amazon’s cash flow draws investor scrutiny
Ahead of the results, analysts expected North American retail sales growth to slow to 6.5% in the third quarter from 16% in the second. Investor’s Business Daily said Amazon’s decision to hold its Prime Day promotion in June rather than its usual July slot had boosted the earlier quarter and was expected to weigh on the September period.
Investors had already reacted to higher spending plans elsewhere in the sector. Meta’s increase to its capital expenditure plans had prompted a sell-off in cloud infrastructure stocks ahead of Amazon’s report. Amazon shares opened down 3.81% on 29 October, before its results were due, TradingKey reported.
Analysts were also looking beyond the current spending plan. Evercore ISI analyst Mark Mahaney raised the question of how large Amazon’s initial 2027 capital expenditure plan would be and whether the company could fund a longer period of negative free cash flow without issuing equity.
