Amazon: 3 Key Takeaways for Long-Term Investors
Key PointsAmazon Web Services revenue reached $46 billion in the third quarter.
Three key takeaways emerged from Amazon's (AMZN -1.41%) third-quarter 2026 earnings call held on October 29, 2026. The cloud computing arm, Amazon Web Services (AWS), aims to become a trillion-dollar revenue business within the next five to 10 years. Capital expenditures are rising to accommodate significant artificial intelligence (AI) infrastructure demand while retail operating margins grow.
AWS's revenue growth accelerated to 39.3% year-over-year in the third quarter, reaching an annualized revenue run rate of $184 billion. This expansion is driven by cloud migrations and enterprise demand for AI compute capacity. Management believes AWS can grow over 40% in each of 2027 and 2028, becoming a trillion-dollar revenue business within five to 10 years.
Same-day fulfillment centers play a crucial role in increasing customer engagement across all retail categories. Customers ordering perishable groceries through these centers tend to purchase significantly more non-grocery items from Amazon's Everyday Essentials category. Perishable grocery customers buy nearly seven times more Everyday Essential units compared to those who do not order groceries with same-day delivery.
Amazon's custom chips, like Graviton for general compute and Trainium for AI workloads, help lower infrastructure costs for cloud clients. As external demand for these chips surges, Amazon plans to commercialize its proprietary technology beyond its proprietary cloud network. Short-term capacity for prior-generation Trainium instances is selling at a premium compared to the first half of the year. Amazon intends to make Trainium available outside of AWS later in 2027.
Capital expenditures are projected to reach approximately $220 billion in 2026 for cloud infrastructure. Management is focusing on hardware cost efficiencies and logistics network density to maintain operating leverage. The company's ambitious long-term vision includes becoming the first business to generate two trillion dollars in annual revenue.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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