Amazon needs stronger AWS growth to support stock and AI spending outlook

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Highlights

Analysts expect AWS revenue to rise nearly 40% year-over-year to $45.7 billion, driving Amazon's group revenue up 12% to $202 billion and net income up 2% to almost $22 billion.
Amazon's capex forecast has increased, with estimates now pointing to about $222 billion in 2026 and nearly $290 billion in 2027, raising concerns over free cash flow as investors demand clarity on the pace and durability of infrastructure spending.
Amazon shares are down more than 10% from August highs and 3.9% on Thursday, as skepticism grows on AI capex and negative free cash flow despite potential profit support from its Anthropic stake and a $500 billion second-quarter backlog.

AWS growth and spending plans in focus

As reported by Moneyweb, citing Bloomberg, Amazon heads into its earnings release on Thursday with Wall Street looking for another strong performance from Amazon Web Services after the cloud division's acceleration helped drive a sharp share-price surge following second-quarter results.

Analysts expect AWS revenue to rise nearly 40% from a year earlier to $45.7 billion, according to data compiled by Bloomberg. Broader group revenue is expected to increase 12% to $202 billion, while net income is seen rising 2% to almost $22 billion.

Market attention is not limited to quarterly earnings. Investors are closely tracking capital expenditure after Amazon lifted its capex forecast last quarter, largely because of higher memory prices, and estimates now point to about $222 billion in 2026 and nearly $290 billion in 2027.

Portfolio manager Jed Ellerbroek of Argent Capital Management says AWS is likely to produce excellent results, while Direxion's Jake Behan says investors need more clarity on where spending levels off and how durable that spending is as AWS revenue growth accelerates.

AI financing concerns shape market reaction

Amazon shares are down more than 10% from an early August record even after the stock posted its best day since 2012 on July 31. Sentiment has been hit by higher interest rates, unease around the AI trade and growing competition from AI services, including Meta Platforms' Muse.

That pressure is building during a busy reporting week for hyperscalers, as investors seek clearer evidence that heavy infrastructure spending on artificial intelligence is producing returns. Amazon shares are down 3.9% on Thursday afternoon, with skepticism around AI spending intensifying after Alphabet's earnings.

Evercore ISI analyst Mark Mahaney says the bigger issue for Amazon's stock may be how the company finances its AI buildout rather than the quarterly figures alone. He says investors are increasingly worried that high capex could damage free cash flow, and Amazon is expected to post negative free cash flow this year and next, though he views the company as better placed than many peers to rely on debt rather than equity.

Anthropic's initial public offering filing could offer some support to sentiment, as Amazon's stake in the AI lab has already lifted profits in recent quarters. Oppenheimer & Co. analyst Jason Helfstein says the filing could also provide more disclosure on compute demand for cloud providers, including the estimated $111 billion committed to AWS, while Amazon's nearly $500 billion second-quarter backlog remains another key measure of how quickly demand converts into revenue.

Our earlier article on the rising financial strain around U.S. AI data centers explained that a growing share of planned projects is being delayed or deemed unrealistic as funding costs climb. We also noted that construction overruns and power-grid constraints are testing whether developers can deliver capacity on time and sustain investor confidence amid record infrastructure spending.

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