Amazon earnings: Can AWS growth justify rising AI spending?

Amazon's third-quarter earnings, due after market close today, will focus on whether AWS's accelerating cloud growth can justify the company's rising AI infrastructure spending, with capital expenditures forecast at $220 billion for 2026, up from $132 billion last year. Analysts expect AWS revenue to grow 37% year-over-year to roughly $45.4 billion, with operating margins around 37.3%, though estimates range widely from 31.4% to 41.1%. Retail sales growth is projected to slow to 5% due to Prime Day's shift to Q2, while total quarterly sales are seen at $202 billion, up 12% annually. Amazon's relationship with AI startup Anthropic, including a $110 billion ten-year AWS contract, faces scrutiny. Industry-wide hyperscaler capex is projected to reach $762 billion in 2026 and $1.3 trillion in 2027, potentially pressuring free cash flow, with Amazon adding $78 billion in debt through June and borrowing $30 billion more in Q3.