Amazon CEO Andy Jassy told analysts AWS should grow revenue by more than 40% in both 2027 and 2028. Amazon stock fell the day after the earnings report, as investors weigh heavy capital spending and negative free cash flow against that outlook.
On Amazon's third-quarter earnings call, Andy Jassy said he expects AWS to grow revenue by more than 40% in both 2027 and 2028. He added that the cloud unit could become a trillion-dollar business at some point in the next five to 10 years.
AWS growth reaches its highest level in nearly five years
The numbers behind that outlook are strong. AWS grew revenue 39.3% year over year, the highest level in nearly five years, and revenue reached an annualized run rate of $184 billion.
AI drives much of this. AWS sells compute capacity, rents out its custom chips, and sells access to AI models, tools, and agents. Jassy said inference already accounts for well over half of AWS's AI revenue, and that enterprises are still very early in using it at scale.
AWS also carries the profit. It made up nearly 23% of Amazon's total revenue in the quarter but nearly 64% of total operating profit. Its backlog now stands at $578 billion.
Spending weighs on the stock
Even so, Amazon stock fell the day after its earnings report. Investors remain concerned about the spending needed to reach these growth rates.
Amazon continues to guide for $220 billion in capital expenditures this year. Jassy also told analysts the company expects to spend "meaningfully more in 2027." That spending has produced negative free cash flow over the past 12 months, which has concerned the market.
The negative free cash flow totals $42.4 billion.
Wall Street does appear to believe in the AWS growth. Consensus estimates project at least 40% growth in AWS revenue in 2027 and 2028, according to S&P Global Market Intelligence. Expectations may also have worked against the report: analysts at William Blair said quarterly year-over-year growth expectations had climbed as high as 44% before the quarter.
The Motley Fool also points to investor worries that AI could cannibalize existing businesses, including Amazon's e-commerce and ads business.
Source: The Motley Fool
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