Amazon just gave Wall Street a quarter it didn’t love and a prediction it can’t ignore.
Shares slid after the company’s third-quarter report, but CEO Andy Jassy used the moment to float a goal no company has ever reached.
“There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years,” Jassy said in the earnings release.
It’s a bold claim, and it puts the spotlight back on what the company’s giant spending spree is actually buying.
Amazon’s solid quarter still disappointed
On paper, the results looked healthy. Amazon’s net sales rose 12% to $201.9 billion, and operating income jumped to $28.1 billion from $17.4 billion a year earlier, good for a 13.9% operating margin that the company called its highest ever, according to Amazon.
Moving Prime Day into the second quarter cut about four percentage points off third-quarter growth.
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Investors focused on the misses instead. Revenue came in just shy of the roughly $202.3 billion analysts expected, and earnings of $1.89 a share fell short of the $1.96 forecast. The stock fell about 6% in overnight trading on Oct. 29, even though advertising revenue reached $19.6 billion.
The bigger worry was cash. Amazon’s free cash flow over the past 12 months swung to an outflow of $42.4 billion, compared with a $14.8 billion inflow a year earlier, and the company blamed heavier spending on AI infrastructure, Amazon reported.
It still expects about $220 billion in cash capital spending this year. For the fourth quarter, Amazon guided for net sales of $240 billion to $247 billion and operating income of $28.5 billion to $33.5 billion.
The capex number has been climbing all year. Amazon first planned about $200 billion in 2026 capital spending back in February, well above what Wall Street expected, and the stock fell more than 10% on the news. Investors have been asking ever since when all that spending will pay off.
The road to $1 trillion in e-commerce
Jassy’s two candidates are Amazon’s online stores and its cloud unit, Amazon Web Services. Retail is the much bigger of the two today, and it has the shorter path.
Amazon’s North America and International segments, which make up the e-commerce business, brought in $638.3 billion over the past four quarters, and that business has been growing at a low-teens rate in recent years, according to The Motley Fool. At a 10% annual growth rate, that business would top $1 trillion in under five years.
This quarter, though, retail looked sluggish. North America sales rose just 6% to $112.9 billion, and International sales climbed 5% to $43.1 billion, or 8% once you strip out currency moves. Part of that is a calendar quirk: Prime Day landed in the second quarter this year instead of the third.
The retail side was stronger earlier in the year. In the first quarter, North America revenue rose 12% and International jumped 19%, and Bank of America pointed to improving retail as one reason to stay bullish, as reported by TheStreet.
Still, BofA warned that a shift toward essentials and groceries could pressure margins, and it expected free cash flow to stay negative through 2027.
AWS is the harder climb, and the bigger bet
AWS has a much longer road ahead. Its sales rose 39% to $46 billion in the third quarter, putting it at a $184 billion annualized run rate, Forbes reported.
That’s impressive growth, but the unit would still need to get roughly five or six times bigger to reach $1 trillion. Wedbush analyst Dan Ives called Jassy’s long-term growth outlook “a stronger answer than the quarter alone.”
Jassy thinks it can get there. He said AWS “can grow north of 40 percent in each 2027 and in 2028,” pointing to “the amount of capacity that we’re adding each year.” He also said Amazon expects to “spend meaningfully more in 2027,” with most of this year’s capital budget going to AWS.
Some analysts are even more upbeat. Morgan Stanley’s Brian Nowak, who named Amazon a top pick with a $350 price target, expects AWS to grow 47% in 2027 and 42% in 2028, according to TheStreet.
That would nearly triple AWS revenue from 2025 to 2028. Nowak also expects Bedrock, AWS’s managed AI service, to become a growing source of high-margin revenue.
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Demand doesn’t seem to be the problem. Back in July, Jassy said that even at its higher spending level, “we will still not have enough capacity to meet all the demand we have in 2026,” and AWS’s backlog had reached $496 billion.
The question is how fast Amazon can build.
What it means for Amazon investors
The post-earnings drop may have made the stock more interesting. After the sell-off, Amazon was set to trade at roughly 20 times operating income, a far cry from the premium it carried for years, according to The Motley Fool. It’s still the world’s largest company by revenue, and it’s still growing at double-digit rates.
Then there’s the money going out the door. Amazon’s free cash flow shrank to about $11.2 billion last year from $38.2 billion in 2024, and its debt load has grown substantially as capital spending accelerated.
Jassy has already said spending will go up again in 2027. JPMorgan sees it as a timing issue, since the data centers are built well before the revenue shows up.
For patient investors, Jassy’s prediction is the real story. Amazon leads in both online retail and cloud computing, and if AWS keeps growing near the pace Jassy expects, the company could have two trillion-dollar businesses within a decade. Getting there will take a lot of money first.
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