Amazon stock weighs fast AWS growth against heavier AI spending

Amazon's third-quarter results sharpened the central investment debate: Amazon Web Services is accelerating, but the spending required to capture artificial intelligence demand is putting heavier pressure on cash flow. Proactive reported on October 30 that the company delivered strong cloud growth while its fourth-quarter outlook fell short of analyst expectations.

Amazon.com stock traded at 240.88 euros on Lang & Schwarz at 13:01 CET on Thursday, November 12, 0.26 percent above the Xetra close of Wednesday, November 11. The comparison uses the 240.25-euro Xetra close for the previous session.

AWS drives the operating momentum

Revenue in the third quarter rose 12 percent year over year to 201.9 billion US dollars, below the 202.3 billion US dollar consensus cited by Proactive. Earnings per share came in at 1.89 US dollars, also below the 1.96 US dollar estimate, while operating income of 28.1 billion US dollars exceeded the 26.2 billion US dollar forecast.

AWS was the strongest part of the quarter. Sales increased 39 percent to 46 billion US dollars, which Proactive described as the division's fastest growth in nearly five years. AWS operating income reached 17.8 billion US dollars and its annualized revenue run rate exceeded 184 billion US dollars.

Management is presenting that acceleration as evidence that investments in cloud infrastructure and AI services are gaining traction. Chief Executive Andy Jassy said he expects AWS growth to exceed 40 percent in both 2027 and 2028. He also pointed to a long-term possibility that AWS could become a trillion-dollar revenue business within five to ten years.

Cash flow remains the pressure point

The investment case is less straightforward in the near term. Capital expenditure reached 77.3 billion US dollars in the third quarter, well above the 57.5 billion US dollar analyst estimate cited by Proactive. Trailing twelve-month free cash flow was negative 42.4 billion US dollars as Amazon expanded its infrastructure for cloud and AI workloads.

Amazon also recorded a 9.5 billion US dollar pretax gain related to Anthropic in non-operating income. That gain supported reported earnings, but it does not change the operating question investors are weighing: whether AWS growth and AI demand can generate returns faster than the company must fund new capacity.

Holiday guidance sets the next test

Amazon forecast fourth-quarter revenue of 240 billion to 247 billion US dollars, placing the midpoint below the 244.5 billion US dollar consensus. Operating income was guided to 28.5 billion to 33.5 billion US dollars, also below the 33.1 billion US dollar midpoint expected by analysts.

The softer outlook matters because the final quarter is normally Amazon's largest period for consumer demand. Advertising revenue, North American sales and international revenue also came in below the estimates cited by Proactive, increasing the importance of holiday execution alongside the cloud business.

For investors, the shares now reflect two competing signals. AWS growth, expanding AI adoption and management's long-range targets support the strategic case, while negative free cash flow, elevated capital spending and a weaker near-term forecast raise the hurdle for further multiple expansion. The next major checkpoint is Amazon's fourth-quarter report, when investors can assess whether cloud growth remains above 40 percent and whether infrastructure spending is beginning to translate into stronger cash generation.

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More developments can be found in More news and analyses on Amazon stock.