Amazon reports its third-quarter 2026 results after the close on Thursday, October 29. The stock jumped about 8% the day after its last report. Since then it has given much of that back, falling 4.6% on October 22 alone as investors grew wary of heavy AI spending heading into another big report. Options markets imply a move of about 6.6% in either direction.
The baseline set in Q2 is worth keeping in mind. AWS revenue reached $42.2 billion in Q2, up 37% year over year, marking its fastest growth in 18 quarters. AWS operating income rose 64% to $16.6 billion, with an operating margin of 39.4%. Growth has now accelerated for five consecutive quarters, from 17% in Q2 2025 rising progressively to 37% in Q2 2026, achieved off a vastly larger revenue base. Sustaining anything near that pace is the ask Thursday night.
The backlog is where Amazon’s case gets unusually concrete. AWS carries a $496 billion contracted backlog in long-term performance obligations. Management has said those AI businesses are growing at triple-digit percentage rates, and in its mid-2026 filing the company noted that much of the AWS capacity it expects to monetize in 2027 to 2028 already has customer commitments. Anthropic’s commitment of more than $100 billion over 10 years and OpenAI’s expansion of $100 billion over 8 years plausibly account for over $200 billion of that backlog. That concentration is both a strength and a risk: two customers, two AI labs whose spending commitments currently outpace their revenue.
For Q3, consensus EPS is $1.96 on revenue of around $202.2 billion, against $1.95 and $180 billion a year ago. The three main questions are whether AWS growth holds near 35%, whether margins stay strong without Q2’s one-off items, and whether capital expenditure rises again. Prime Day moved into Q2 this year, so Q3 growth would be nearly 400 basis points higher if adjusted for that shift.
The spending side is the live debate. Amazon has said it expects to invest approximately $200 billion in capex in 2026. Free cash flow has turned to an outflow of $7.6 billion over the trailing twelve months, driven by a year-over-year increase of $66.1 billion in property and equipment purchases, primarily for artificial intelligence.
At recent prices, Amazon trades at about 22 times 2027 operating EPS, below both Microsoft and Alphabet, despite faster AWS and advertising business growth. That gap is the argument. If AWS holds near 35% growth Thursday and management signals that Q4 capacity constraints are easing, the discount closes. If growth decelerates meaningfully and capex guidance moves higher again without a corresponding revenue response, the multiple compression that started after Q2’s spike resumes. Thursday’s call at 5 p.m. ET is where that gets resolved.
