Amazon.com said sales at its cloud unit, Amazon Web Services, rose 39.3% to $46.0 billion in the third quarter, the fastest pace in nearly five years, and kept its forecast for about $220 billion of cash capital spending in 2026, most of it for AWS.

For Asia, the spending figure matters more than the retail numbers. Amazon's data-center build-out runs on memory chips, accelerators and server racks made largely by suppliers in South Korea and Taiwan, and the company said in its Oct. 29 results release that supply volatility, "including for memory chips," is one of the risks to its outlook.

Investors were less impressed with the rest of the report. Earnings per share of $1.89 missed the $1.97 analysts expected, according to FactSet data cited by The Guardian, and shares fell more than 6% in after-hours trading. They closed 1.8% lower on Friday as a wider sell-off in technology stocks hit the Nasdaq.

AWS backlog reaches $578 billion

Total net sales rose 12% to $201.9 billion, just short of the $202.2 billion consensus. Amazon said Prime Day moved into the second quarter this year in most large markets, which held back third-quarter growth by about 4 percentage points.

Operating income climbed to $28.1 billion from $17.4 billion a year earlier, for an operating margin of 13.9%, the highest Amazon has reported. AWS supplied $17.8 billion of that, up from $11.4 billion. Net income slipped to $20.7 billion from $21.2 billion, which the company attributed mainly to $9.5 billion of pre-tax gains on its Anthropic investment in the year-ago quarter.

On the earnings call, Chief Executive Andy Jassy said the AWS backlog stood at $578 billion, growing at triple-digit rates, and that the unit was installing an AI accelerator about every 14 seconds. Customers take up new capacity almost as fast as it is added, he said. In the results release he said Amazon projects AWS revenue growth above 40% in both 2027 and 2028.

The cost of that growth shows up in cash flow. Free cash flow for the 12 months to September was an outflow of $42.4 billion, against an inflow of $14.8 billion a year earlier, after purchases of property and equipment rose by $94.8 billion. The $220 billion capex target compares with $128 billion spent in 2025, and The Guardian reported that Jassy had cited higher memory chip prices as the main reason for raising it from $200 billion earlier in the year.

Memory, racks and custom chips

That memory bill flows to the region's chipmakers. Jassy said AWS margins on AI work are improving even with heavier component costs, naming memory, and heavy depreciation. Korean producers are on the other side of that trade: SK Hynix recently posted a record 83 trillion won operating profit.

Taiwanese hardware makers are also tied in. Wiwynn, which builds and integrates server systems and racks for Amazon's data centers, said in September it is investing more than $1.6 billion in a plant in Socorro, Texas. Amazon said employment there should pass 2,500 next year and reach 4,000 at full capacity. The project is part of a push to bring production of custom hardware to the U.S., which means some rack assembly for Amazon will happen outside Asia even as Taiwanese companies keep the contracts.

Amazon's in-house chips are a growing part of the mix. Jassy said the chips business is growing at triple-digit percentages year over year, and that revenue commitments for both Graviton processors and Trainium AI accelerators have risen more than 20-fold. Demand for older generations is holding up: backlog for prior-generation Graviton instances more than doubled from the previous quarter. Amazon plans to offer Trainium outside AWS late in 2027, he said.

Chinese AI developers appear in the results too. AWS said it has added managed versions of Kimi and GLM models to its Bedrock service, alongside OpenAI models. Kimi's developer, Moonshot AI, is weighing a Hong Kong listing.

What investors are watching next

The report landed in a difficult week for big technology stocks. The Guardian reported that the Nasdaq 100 was on course to lose more than $2 trillion of market value in October, as Amazon, Alphabet and Meta all lifted spending plans and investors questioned how quickly the outlays would pay back.

Amazon's guidance did little to settle that debate. It expects fourth-quarter net sales of $240 billion to $247 billion, up 12% to 16% from a year earlier, against a $244.16 billion consensus, and operating income of $28.5 billion to $33.5 billion. It expects advertising revenue growth to pick up to the high teens.

For Asian suppliers, the number to watch is what Amazon spends after this year's $220 billion, and Jassy has already told investors that AWS revenue should grow more than 40% in each of the next two years.