Amazon's cloud business grew 39%, its fastest in nearly five years, but AI spending pushed Amazon's free cash flow deep into the red.

Amazon reported third-quarter results on Thursday. Amazon Web Services (AWS), its cloud business, brought in $46.0 billion, up 39% from a year earlier and its fastest growth in nearly five years, with $17.8 billion in operating profit (Amazon). CEO Andy Jassy said AWS is now on pace for $184 billion a year and projected growth of more than 40% in both 2027 and 2028. On the earnings call he said AWS has a $578 billion backlog of signed future business and that inference, meaning running AI models for customers rather than training them, already makes up "well over half" of AWS's AI revenue (call transcript via Benzinga).

The cost is showing up in the cash. Amazon spent $77.3 billion on property and equipment in the quarter, up from $35.1 billion a year earlier, and its free cash flow over the past 12 months, the cash left after that spending, swung to an outflow of $42.4 billion from a $14.8 billion inflow a year ago. Amazon says that's mainly AI investment. It still expects about $220 billion in cash capital spending this year, and Jassy said it will spend "meaningfully more" in 2027. Amazon's overall revenue of $201.9 billion and its profit came in just under analysts' estimates, and the shares fell more than 6% in after-hours trading (CNBC). It's the same pattern as Google and Microsoft on Wednesday: cloud growth speeding up, and investors focused on how much the AI buildout costs.

Amazon also said it will start selling its own Trainium AI chips outside AWS "late in 2027," the same move Google made with its TPU chips (CNBC). The results list a run of AI tools as well. AWS Continuum, a service that finds and fixes security holes in code, is now generally available and is coming into Anthropic's Claude Code, OpenAI's Codex and Amazon's Kiro. Amazon open-sourced Kiro Crew, a workspace that runs several coding agents in parallel, and previewed Strands Box, an open-source sandbox that sets rules for what an AI agent can access. Bedrock, AWS's service for using other companies' models, added OpenAI's GPT-6 models, Moonshot's Kimi K3, Z.ai's GLM 5.3 and SpaceX's Grok 4.7.

What to watch: whether Amazon actually gets to 40%+ cloud growth while spending even more in 2027, and whether investors keep punishing every big cloud company for the price of the AI buildout. For developers, the near-term change is Continuum showing up inside Claude Code and Codex.