Amazon Stock Forecast

Amazon cloud business is growing faster than it has in almost five years, but free cash flow is the worst in years. Question is simple: will the money, Amazon is pouring into AI infrastructure, come back as a profit, if yes, then when.

Amazon Q3 results

Amazon reported Q3 results

• Revenue was $201.9 billion, up 12% from a year earlier.
• Net income slipped to $20.7 billion from $21.2 billion,
• Earnings per share fell to $1.89 from $1.95.

Both revenue and earnings came in below Wall Street's expectations, and the stock dropped about 7% the next day.

AWS revenue rose 39% to $46.0 billion, its fastest growth in 5 years - CEO Andy Jassy said AWS is now running at a $184 billion annual pace and projected growth above 40% in both 2027 and 2028.

For Q4 Amazon guided to sales of $240 billion to $247 billion, up 12% to 16%.

Good news

AWS has a backlog of about $578 billion, which can be interpreted that large huge amount of customers committing to real spending.

Advertising and third-party seller services bring in high revenue, plus shift to regional fulfillment has lowered delivery costs.

Bad news

Amazon spent $75.9 billion on CapEx in Q3, through 9 months - $172.2 billion. For all of 2026, they expect about $220 billion, up from an earlier plan of $200 billion, because memory chips cost more (why?).

In the third quarter, spending ran 1.8 times the cash the business generated from operations. As a result, free cash flow over the past twelve months was - $42.4 billion, compared with positive $14.8 billion a year earlier.

Amazon held about $114.2 billion in cash and securities at the end of September,bBut debt is climbing - $128.9 billion by midyear from $65.6 billion at the end of 2025.

Amazon also put $21.3 billion into OpenAI after June 30.

More bad news

Capital expenditures aren't reflected in the income statement immediately; they're spread over the life of the equipment as depreciation. This is why Amazon can currently post high operating profits.

As new data centers and chips are depreciated, expenses will rise. If AWS revenue continues to grow at 40%, these expenses might be manageable, If not then Amazon will have to think of some other ways to hold on.

Risks

• Voters backed at least 33 local limits on data centers on November 3, including a ban in Trenton, Ohio, aimed at an Amazon project.
• Amazon is a major cloud provider and an investor in AI labs that buy cloud capacity. How much of that demand is funded by the suppliers themselves.
• Antitrust investigations into Amazon marketplace and advertising practices are still open and weigh on sentiment.

Ultimately, Amazon is a strong business, there's no denying it, and the evidence of demand is compelling: accelerated growth, a huge backlog of orders. But there's no evidence yet that these costs are paying off, and the stock price already suggests they will…