Amazon Needs a New AWS Breakthrough: What Does Wall Street Expect from the Company's Earnings Report?

Following the release of its previous financial report, which showed rapid growth in Amazon’s cloud division, Amazon Web Services (AWS), Amazon’s stock soared, posting its best single-day performance since 2012. However, since then, the company’s stock has lost more than half of that gain, and Amazon now needs to repeat that success to boost its share price again, Bloomberg notes. The company will release its third-quarter 2026 report on October 29 after the U.S. market closes. In this article, we explain what Wall Street analysts and shareholders are expecting from it.

Since hitting a local high in early August following its second-quarter earnings report, Amazon’s stock has fallen by more than 10%. Investor sentiment has been weighed down by concerns over investments in artificial intelligence, pressure from high interest rates, and competition from third-party AI services and agents, such as Meta’s Muse. During trading on October 29, Amazon shares fell by more than 3% amid growing skepticism about the AI boom following the release of Alphabet’s earnings report. However, Wall Street is expecting good news from Amazon. According to analysts’ estimates, the company’s revenue was expected to grow by 12% to $202 billion during the past reporting period, while net income was projected to rise by 2% to nearly $22 billion.

— Investors’ attention is focused primarily on AWS. According to analysts surveyed by Bloomberg, revenue from the company’s cloud division rose by nearly 40% in the third quarter compared with the same period last year, reaching $45.7 billion. “A year ago, investors would have doubted that they [Amazon] could do this. But now I think we’ll see excellent results from AWS,” said Jed Ellerbrook, a portfolio manager at Argent Capital Management.

— In addition to AWS metrics, market participants will be closely monitoring the company’s capital expenditures. Last quarter, Amazon raised its capital expenditure forecast, largely due to rising prices for memory chips. Investors are unlikely to be surprised if the company raises its planned spending again, notes Bloomberg. Analysts estimate that by 2026, these expenditures could rise from $220 billion to approximately $222 billion, and to nearly $290 billion by 2027. “We need to understand at what level spending will plateau and how sustainable that is,” said Jake Behan, head of capital markets at Direxion. According to him, this should occur as AWS’s revenue growth accelerates “from high to even higher.”

— Free cash flow. For Amazon shares, how the company will finance its artificial intelligence expenses may prove more important than the quarterly results themselves, according to Evercore ISI analyst Mark Mahaney. Meta’s strong financial results last week took a back seat to its funding needs. Investors are increasingly concerned that capital expenditures are eroding free cash flow and are watching to see whether companies are raising funds to build AI infrastructure through stock offerings or loans, according to Bloomberg. Amazon’s free cash flow is expected to be negative this year and next.

“The intensifying competition for capital in the artificial intelligence sector also increases the likelihood of a large-scale stock offering. We would not draw a direct parallel between Meta and Amazon, as we believe Amazon is in a stronger position than most other players to finance its AI development (relying on debt financing rather than stock offerings),” Mahanai wrote.

— Order backlog. It is also crucial that Amazon disclose any unfulfilled contractual obligations and how close the company is to receiving payments under those contracts. In the second quarter, Amazon’s order backlog totaled nearly $500 billion. “We need to understand whether Amazon is running into capacity constraints in fulfilling these orders—we’ve seen this happen with other companies. How realistic is it to convert this backlog into revenue?” said Behan of Direxion.

The market’s positive reaction to Anthropic’s IPO filing could also work in Amazon’s favor: its stake in this AI developer has boosted the company’s profits in recent quarters. The offering could value Anthropic at up to $1.75 trillion. According to calculations by Oppenheimer analyst Jason Helfstein, every $1 trillion in Anthropic’s market capitalization would add about 7% to Amazon’s market value, which currently stands at approximately $2.7 trillion.

Anthropic's IPO "will provide greater transparency regarding demand for cloud providers' computing capacity, including the approximately $111 billion that is estimated to be under contract with AWS," Helfstein wrote in a research note last week.

This article was AI-translated and verified by a human editor