Amazon’s AWS Strength Outpowers Its Tailwainds So I Accumulate
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Amazon (NASDAQ:AMZN | AMZN Price Prediction) delivered a third-quarter earnings report that strengthened its cloud growth story. AWS grew 39% year over year, its fastest growth in nearly 5 years. As long as the cloud engine speeds up like this, the growth case stays intact.
Why AWS Acceleration Drives the Amazon Growth Case
AWS is Amazon’s profit engine, and it keeps speeding up as it gets bigger. Growth ran 24% in Q4 2025, 28% in Q1, 37% in Q2 and 39% in Q3. Q3 revenue reached $45.98B, and AWS operating income climbed to $17.77B from $11.43B a year earlier.
The runway looks long. AWS carries a $578 billion backlog, and Bedrock token volume rose nearly 17x. CEO Andy Jassy said “We believe that AWS can grow north of 40% in each of 2027 and 2028 and be a trillion-dollar revenue business in the next five to 10 years.”
Three Numbers Powering Amazon’s Momentum
First, margins. Consolidated operating margin hit 13.9%, the company’s highest ever, and operating income rose 61.15% to $28.08B, even with a Prime Day calendar shift reducing retail growth by roughly 400 bps.
Second, custom silicon. The chips business grew at triple-digit percentages, Graviton and Trainium commitments rose more than 20x, and customers saved more than $2 billion in Q3 alone. Owning the chip brings down AWS’s cost structure for years.
Third, the balance sheet. The leverage ratio sits at 0.372, net debt to EBITDA at 0.454 and interest coverage at 35.17. Amazon pays no dividend, so returns come from share price compounding, and the stock has returned 622.4% over ten years.
How Amazon Stacks Up Against Walmart and Alphabet
Walmart (NASDAQ:WMT) is the retail name readers reach for first. It trades at a P/E of 46 against Amazon’s 37, with an operating margin of 4.2% versus Amazon’s 11.16%. Walmart carries a richer multiple with lower margins.
Meanwhile, Alphabet (NASDAQ:GOOGL) looks cheaper, and Google Cloud grew 103%. Alphabet funds its expansion partly by issuing stock, including a $49.6 billion net equity raise in Q2, and posted Q3 free cash flow of -$9.07 billion. Every new share it sells dilutes existing shareholders’ claim on future profits.
Capex Risks That Could Pressure Amazon’s Returns
Capital spending. Amazon plans roughly $220 billion of 2026 cash capex and significantly more in 2027. Q3 capex jumped 120%, trailing free cash outflow reached $42.4 billion, and AI margins run below core AWS margins. Should AI demand cool, Amazon would hold expensive idle capacity.
That expansion has to be powered and cooled by somebody other than the hyperscaler writing the check, which is why the suppliers behind the data centers keep showing up in our free report on seven AI infrastructure names that aren’t chipmakers.
The cash engine keeps pace with that risk. Operating cash flow rose 19.4% to $42.42B, AWS margin held at 38.7% despite the AI mix, and management cites visibility into capacity commitments for 2027, 2028, and some of 2029.
What to Watch as AWS Scales From Here
Approximately 85% of global IT spending still sits on premises. Q4 operating income guidance of $28.5B to $33.5B compares with $25.0B a year ago, and management expects advertising growth to return to the high teens. Each quarter, the cloud business gets larger and faster at once, and the key signal to keep an eye on is whether that engine holds its pace.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
