We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
AMZN Q3 Earnings Call Highlights AWS Growth and AI Spending
Read MoreHide Full Article
Key Takeaways
Amazon expects AWS growth above 40% in both 2027 and 2028, following 39.3% growth in Q3.
Amazon plans $220B in 2026 capital spending, primarily for AWS, with higher investments expected in 2027.
AWS backlog hit $578B, while Bedrock token volume surged nearly 17-fold amid accelerating AI adoption.
Amazon.com, Inc. (AMZN - Free Report) used its third-quarter 2026 earnings call to outline ambitious cloud growth expectations, supported by accelerating artificial intelligence (AI) demand and substantial infrastructure investments.
Management emphasized AWS capacity expansion, improving retail efficiency and longer-term profitability. The outlook came despite earnings of $1.89 per share and revenues of $201.94 billion missing the Zacks Consensus Estimate of $2.01 and $202.11 billion, respectively.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon CEO Andy Jassy highlighted AWS revenue growth of 39.3% year over year to $46 billion, marking its sixth consecutive quarter of acceleration. The business reached a $184 billion annualized revenue run rate.
Jassy projected AWS revenue growth exceeding 40% in both 2027 and 2028, supported by expanding infrastructure capacity and enterprise AI adoption. He also outlined a potential path toward $1 trillion in annual AWS revenues within five to 10 years.
During questions from Morgan Stanley, Jassy explained that advance reservations for large computing deployments provide substantial visibility into customer demand through 2028.
Amazon Expands AI Infrastructure Investment
Jassy reiterated Amazon's expectation of approximately $220 billion in cash capital expenditures during 2026, primarily directed toward AWS. Spending is expected to increase meaningfully in 2027.
AWS backlog reached $578 billion, while Bedrock token volume increased nearly 17-fold year over year. Fortune 500 spending on Bedrock rose nearly sevenfold.
Responding to JPMorgan, Jassy emphasized that Amazon intends to fund infrastructure expansion while shortening investment payback periods. He also confirmed plans to begin selling Trainium chips externally in late 2027.
AMZN Defends Cloud Economics Amid AI Expansion
AWS generated operating income of $17.8 billion, with an operating margin of 38.7%, reflecting efficiency improvements and expanding demand.
During questions from Evercore ISI, CFO Brian Olsavsky cautioned that AI services currently carry lower margins than established cloud offerings. Higher component costs and infrastructure investments also create pressure.
Jassy told Barclays that Amazon's proprietary Trainium chips and owned or long-leased data centers provide structural cost advantages. Management emphasized improving AI profitability without providing longer-term AWS margin guidance.
Amazon Focuses on Faster Delivery and Grocery
Amazon's retail strategy continues emphasizing faster fulfillment, lower delivery costs and expanded grocery availability. Jassy reported that fresh groceries and everyday essentials grew roughly three times faster than the broader stores business. These categories represented approximately half of worldwide units sold.
During questions from Evercore ISI, Jassy highlighted stronger purchasing activity among grocery customers. Customers ordering perishables through same-day delivery purchased nearly seven times more everyday essentials units than customers who did not.
AMZN Expects Advertising Growth to Rebound
Advertising revenues reached $19.6 billion, increasing 12% year over year, with growth affected by changes in promotional timing.
Jassy explained that shifting Prime Day into the second quarter created an 850-basis-point sequential headwind to third-quarter advertising growth. Management expects growth to return to the high teens in the fourth quarter.
He also dismissed concerns that external AI shopping agents were materially affecting advertising demand. Amazon introduced Ads Agent and integrated campaign tools to automate advertiser planning and optimization.
Amazon Outlines Fourth-Quarter Expectations
CFO Olsavsky projected fourth-quarter revenues between $240 billion and $247 billion, representing year-over-year growth of 12% to 16%.
Operating income is expected to be between $28.5 billion and $33.5 billion. Management incorporated an approximately 60-basis-point foreign exchange headwind into its revenue outlook.
Olsavsky also identified continuing Amazon Leo expenses and rising transportation costs as considerations.
Capitalization of certain Leo production and launch costs is now expected to begin in the first quarter of 2027.
AMZN Maintains Its Long-Term Investment Focus
Management's commentary reflected confidence in cloud demand, AI adoption and retail efficiency improvements, alongside recognition of substantial capital requirements.
Amazon's priorities remain expanding AWS capacity, improving infrastructure economics and strengthening its fulfillment network while pursuing new customer opportunities.
Zacks Rank and Style Scores Signal Mixed Prospects
AMZN currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term earnings revision outlook. Its Growth Score of B and Momentum Score of A highlight favorable growth characteristics and strong price momentum. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, the VGM Score of D indicates less attractive valuation characteristics. Its VGM Score of B reflects a favorable combined assessment of value, growth and momentum, although the stock does not carry a top-two Zacks Rank.
The Zacks Rank can change as analysts revise earnings estimates following the latest results, making subsequent estimate revisions important to monitor.
View the Zacks #1 Rank List
Image: Bigstock
AMZN Q3 Earnings Call Highlights AWS Growth and AI Spending
Key Takeaways
Amazon.com, Inc. (AMZN - Free Report) used its third-quarter 2026 earnings call to outline ambitious cloud growth expectations, supported by accelerating artificial intelligence (AI) demand and substantial infrastructure investments.
Management emphasized AWS capacity expansion, improving retail efficiency and longer-term profitability. The outlook came despite earnings of $1.89 per share and revenues of $201.94 billion missing the Zacks Consensus Estimate of $2.01 and $202.11 billion, respectively.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote
AMZN Targets Sustained AWS Growth Above 40%
Amazon CEO Andy Jassy highlighted AWS revenue growth of 39.3% year over year to $46 billion, marking its sixth consecutive quarter of acceleration. The business reached a $184 billion annualized revenue run rate.
Jassy projected AWS revenue growth exceeding 40% in both 2027 and 2028, supported by expanding infrastructure capacity and enterprise AI adoption. He also outlined a potential path toward $1 trillion in annual AWS revenues within five to 10 years.
During questions from Morgan Stanley, Jassy explained that advance reservations for large computing deployments provide substantial visibility into customer demand through 2028.
Amazon Expands AI Infrastructure Investment
Jassy reiterated Amazon's expectation of approximately $220 billion in cash capital expenditures during 2026, primarily directed toward AWS. Spending is expected to increase meaningfully in 2027.
AWS backlog reached $578 billion, while Bedrock token volume increased nearly 17-fold year over year. Fortune 500 spending on Bedrock rose nearly sevenfold.
Responding to JPMorgan, Jassy emphasized that Amazon intends to fund infrastructure expansion while shortening investment payback periods. He also confirmed plans to begin selling Trainium chips externally in late 2027.
AMZN Defends Cloud Economics Amid AI Expansion
AWS generated operating income of $17.8 billion, with an operating margin of 38.7%, reflecting efficiency improvements and expanding demand.
During questions from Evercore ISI, CFO Brian Olsavsky cautioned that AI services currently carry lower margins than established cloud offerings. Higher component costs and infrastructure investments also create pressure.
Jassy told Barclays that Amazon's proprietary Trainium chips and owned or long-leased data centers provide structural cost advantages. Management emphasized improving AI profitability without providing longer-term AWS margin guidance.
Amazon Focuses on Faster Delivery and Grocery
Amazon's retail strategy continues emphasizing faster fulfillment, lower delivery costs and expanded grocery availability.
Jassy reported that fresh groceries and everyday essentials grew roughly three times faster than the broader stores business. These categories represented approximately half of worldwide units sold.
During questions from Evercore ISI, Jassy highlighted stronger purchasing activity among grocery customers. Customers ordering perishables through same-day delivery purchased nearly seven times more everyday essentials units than customers who did not.
AMZN Expects Advertising Growth to Rebound
Advertising revenues reached $19.6 billion, increasing 12% year over year, with growth affected by changes in promotional timing.
Jassy explained that shifting Prime Day into the second quarter created an 850-basis-point sequential headwind to third-quarter advertising growth. Management expects growth to return to the high teens in the fourth quarter.
He also dismissed concerns that external AI shopping agents were materially affecting advertising demand. Amazon introduced Ads Agent and integrated campaign tools to automate advertiser planning and optimization.
Amazon Outlines Fourth-Quarter Expectations
CFO Olsavsky projected fourth-quarter revenues between $240 billion and $247 billion, representing year-over-year growth of 12% to 16%.
Operating income is expected to be between $28.5 billion and $33.5 billion. Management incorporated an approximately 60-basis-point foreign exchange headwind into its revenue outlook.
Olsavsky also identified continuing Amazon Leo expenses and rising transportation costs as considerations.
Capitalization of certain Leo production and launch costs is now expected to begin in the first quarter of 2027.
AMZN Maintains Its Long-Term Investment Focus
Management's commentary reflected confidence in cloud demand, AI adoption and retail efficiency improvements, alongside recognition of substantial capital requirements.
Amazon's priorities remain expanding AWS capacity, improving infrastructure economics and strengthening its fulfillment network while pursuing new customer opportunities.
Zacks Rank and Style Scores Signal Mixed Prospects
AMZN currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term earnings revision outlook. Its Growth Score of B and Momentum Score of A highlight favorable growth characteristics and strong price momentum. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, the VGM Score of D indicates less attractive valuation characteristics. Its VGM Score of B reflects a favorable combined assessment of value, growth and momentum, although the stock does not carry a top-two Zacks Rank.
The Zacks Rank can change as analysts revise earnings estimates following the latest results, making subsequent estimate revisions important to monitor.