$AMZN · Jose Najarro Stocks · 2026-10-30

We did have Amazon report earnings. The stock is down roughly 7.3% after hours.

And then with Amazon we are going to see some interesting kind of cloud growth numbers that to me I thought was impressive yet the market seems to hate it right now.

Now, let's look at AWS for the final portion of today's episode. Like I mentioned, make sure to check out my community at whatthechipappen.com. So, AWS grew nearly 40% year-over-year, sitting at 46 billion in quarter 3 of 2026.

That is insane. You are sitting now in a ARR of close to 180 184 billion. Insane.

Unfortunately, unfortunately on a sequential basis, they are seeing uh operating margins dropped. It dropped about.7 percentage point from quarter 2. Company is saying that hey look, while AI is doing really good, it does carry a little bit of lower margins compared to the mature core business.

Still 38.7 isn't the worst in operating margins, right? It's not like it dropped dramatically. So, while it is weaker in AI, it's not as crazy as low or bearish as other people try to make it seem.

Now, the big story for Amazon is they're not stopping in capex, right? Nowhere near in capex. They believe in 2020 they're going to spend approximately $220 billion right now in free cash flow.

They are already free cash flow negative of roughly 42 in the 42 billion in the 21 12 months. That's going to continue to get worse. And Amazon has even mentioned that they plan to spend more in capix in 2027.

Now some pretty cool news for Amazon. They are planning to sell their external chip tranium in late 2027. They have customers demand and for them they have to be smart on how they allocate.

They have to sell compute. they they want to sell their AI chips, but also they don't want to get rid of too much compute, right? Because Trainium is being used for a lot of their own solutions.

The great thing about selling chips is you get to collect that revenue right away. The great thing about being cloud is you get to have that multiple year of revenue being collected.

Maybe not all at once, but over time, right? Just kind of the cloud business. Uh but interesting that they're going to start selling chips. I think that's really good for companies like Marll, whoever helps build Amazon build their chips.

Now, in forms of AI demand, Fortune's 500 spending over seven times more in Bedrock year-over-year. Total to talk total token volume has increased roughly 17 yearover-year. So, we're seeing more usage and better adoption and more spending uh by for the AI market.

Now, Amazon, and this is where I want to end today's episode, right? Cuz it's interesting that the market is fearful, but Amazon projects faster AWS growth ahead. They project revenue growth rate of over 40% in both 2027 and in 2028.

Just kind of to put it into perspective, this quarter alone, they grew 39.3%. So for next year, they believe they're still going to do better. And the year after that, that doesn't tell me that there is too much demand.

That doesn't tell me that there's too much capacity. It tells me the opposite. It tells me that any form of active power and anybody building AI infrastructure right now is going to be able to see strong revenue growth rate.

And with strong revenue growth rate, you're going to be able to make an amazing ROI in whatever form of AI infrastructure investment you have made. And for that reason, I do have certain cloud players and a lot of hyperscalers in my portfolio.