The e-commerce and cloud computing mega-giant Amazon is scheduled to report third-quarter earnings after the market closes on Oct. 29. Consensus expects Amazon to deliver Q3 revenue of 202.24 billion US dollars, adjusted EPS of 1.96, and EBIT of 26.18 billion US dollars, implying year-over-year growth of 13.74% for revenue, 24.67% for adjusted EPS, and 32.76% for EBIT.

What to watch in the Q3 report

CapEx Outlook and Free Cash Flow: Is Spending Still Rising, and Is the Cash Burn Slowing?

Amazon's AI and data-center investment program is a major valuation variable. The market needs evidence that spending will generate sufficient future returns.

Amazon raised its 2026 cash capital expenditure outlook to about $220 billion from $200 billion on higher memory costs, and trailing-12-month free cash flow swung to an outflow of $7.6 billion from an inflow of $18.2 billion. Management also expects capacity to fall short of demand through 2027, which could cap near-term AI revenues.

Amazon spent much of 2026 defending its massive investments in artificial intelligence (AI) infrastructure, with capital expenditures expected to reach approximately $220 billion this year. That's an enormous amount of money, even for a company of Amazon's size.

However, the market isn't necessarily impressed by big spending announcements anymore. For Amazon, the key question for Q3 FY2026 is whether its massive investment in AI infrastructure and AWS capacity is translating into enough future growth to justify the near-term cash outflow.

The most important distinction is between accounting earnings and cash generation. Amazon can report strong operating income while free cash flow (FCF) remains under pressure because data centers, AI accelerators, servers, networking equipment and power infrastructure require substantial upfront spending.

The critical signal is that operating cash flow is growing, but capital spending is growing fast enough to overwhelm it. Amazon's TTM FCF has moved into negative territory despite stronger cash generation from operations.

The pace of capital expenditures, management's full-year spending outlook, AWS growth, operating cash flow, and whether free cash flow is stabilizing or deteriorating are the key factors to watch in Q3 earnings report.

AWS Should Dictate AMZN's Operational Performance Even More

AWS is the key economic test of the AI buildout. AWS sales is expected to jump 38% year-over-year to $45.66 billion in the third quarter. If we look at Amazon's business as a whole, we see AWS becoming a greater part of the company's overall revenue profile.

This revenue mix shift to continue in the upcoming Q3 and beyond. And given that AWS' CC EBIT margins of nearly 40% are much higher than that of the sub-10% levels in the e-commerce and other business segments, the share of AWS' EBIT margin contributions to increase from ~61% too, leading to an overall margins lever.

The growth runway for AWS is massive. Currently, it is tracking at almost $150B in TTM revenues. And management is eyeing the $1T milestone over the medium to longer term. The key driver of this is the fact that 85% of global IT spend still remains on-premises, so AWS' cloud migrations and AI inference hosting have a lot of scope yet.

A strong AWS result can support the case for elevated CapEx. But revenue growth alone is not enough: investors also need confidence that the resulting cash flows will ultimately justify the capital invested.

Amazon's shareholder letter explains that infrastructure spending can precede monetization by roughly 6–24 months, depending on the component, and that much of its 2026 AWS investment is expected to be monetized in 2027–2028.

Analysts' Opinions

Morgan Stanley Names Amazon Top Pick And Raises Price Target

Morgan Stanley named Amazon its top pick on Oct 20. The investment bank raised its AMZN stock price target to $350 from $335 and kept an Overweight rating.

The firm sees about 40% upside to its target and also sees a 3-to-1 risk-reward ratio, which offers a margin of safety.

The analysts pointed to AWS growth and its ability to run as a "rule of 90" company. They also cited better visibility for Bedrock and Amazon's position in agentic commerce.

The firm raised its AWS forecasts and now expects 47% growth in 2027 and 42% in 2028 due to higher Nvidia GPU shipments.

It also thinks AWS can earn incremental EBIT margins in the high 40s in 2027 and 2028, which could help Amazon earn about $16.50 per share in 2028.

Morgan Stanley listed five catalysts. They include AWS's path toward $1 trillion in revenue, Bedrock's strength in the inference phase of AI, and agentic commerce.

Wells Fargo Slashes Amazon's Price Target to $329, Sees AWS Acceleration To Continue In Q4

Wells Fargo lowered its price target on Amazon to $329 from $338 while maintaining an 'Overweight' rating on Oct 12.

The firm expects Amazon’s third-quarter results to come in ahead of consensus, with AWS growth accelerating in the fourth quarter. Wells Fargo expects the acceleration to support revenue and operating income guidance at the high end of Street expectations.

The firm also expects Amazon to reiterate its 2026 capital expenditure forecast of $220 billion.

Wells Fargo is looking for more detail on Amazon’s consumer AI strategy, including how the company approaches emerging AI agents and existing offerings such as Meta’s Muse, according to The Fly.

In a report published on September 22, The Wall Street Journal reported that Amazon had blocked Muse from accessing its shopping site and making purchases on users’ behalf.

An Amazon spokesperson told Adweek: “We think it's fairly straightforward that third-party applications that offer to make purchases on behalf of customers from other businesses should operate openly and respect service provider decisions about whether or not to participate.”