• Amazon reported third-quarter earnings on Thursday.
• Amazon stuck with its $220 billion capex forecast for 2026.
• CEO Andy Jassy expects the company to spend "meaningfully more" next year.

Amazon is already spending a record amount on AI data centers. Next year will be even bigger.

The world's biggest cloud-computing company reported third-quarter results on Thursday and reiterated its plan for $220 billion in capital expenditure for 2026.

Then, CEO Andy Jassy shared his outlook for next year, saying Amazon expects "to spend meaningfully more in 2027."

Amazon’s spending has become the central question hanging over the company. It's building massive data centers and buying expensive chips and other gear to meet surging demand for AI.

That's pushed its free cash flow into negative territory, with third-quarter results showing a hole of $42.4 billion for the trailing twelve months.

Amazon spent $75.9 billion in cash capital expenditures during the third quarter alone, CFO Brian Olsavsky said, primarily on AWS and AI infrastructure.

The results did little to ease investors' concern about the spending. Amazon's third-quarter revenue and earnings came in below Wall Street expectations, and its shares fell roughly 6% in after-hours trading.

"The cloud unit's improving operating margin was one welcome signal, but it may not be sufficient to alleviate concerns about the sharp spike in capex spending and corresponding freefall of its free cash flow," Sky Canaves, a principal analyst at eMarketer, said in a statement.

Amazon has argued that AI infrastructure takes years to build before it can begin generating revenue, and that AI chip servers typically break even in less than three years once deployed. But the scale of the outlay has raised the stakes for Amazon's cloud business to sustain rapid growth as competitors make similarly enormous bets.

On Thursday, Jassy reiterated his confidence in the company's AI business model and outlook, saying there's a "clear line of sight to attractive financial returns."

The time it takes Amazon to turn newly delivered servers into revenue-generating capacity has also come under scrutiny.

Last week, Business Insider exclusively reported that Amazon has begun receiving billions of dollars in Nvidia server racks before all of the gear can be deployed at their final data-center sites, as power shortages and construction delays hold back new capacity.

"We can fund this plan"

Jassy argued Thursday that Amazon has visibility into the demand supporting its huge AI investments. Customers that need the largest AI deployments reserve capacity well ahead of time, he said, in blocks ranging from hundreds of megawatts to, in some cases, as much as a gigawatt.

"We have very good visibility into 2027 and 2028 and some of '29 too with respect to what customers want in those really big chunks of capacity," Jassy said.

AWS revenue rose 39.3% year over year to $46 billion in the third quarter, its fastest growth in nearly five years. Jassy said he expects AWS revenue to grow more than 40% in both 2027 and 2028, a projection that requires the company to keep rapidly adding capacity.

Jassy described the spending as a once-in-a-lifetime opportunity rather than an optional expansion. It would be more convenient, he said, if Amazon could spread the investment over 25 years. But the speed of the AI market does not allow that.

"We can fund this plan," he said. "It will forever change our revenue. It will forever change our free cash flow."

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Amazon warehouse workers used to spend much of their days walking, pushing carts through long aisles to manually retrieve customer orders from shelves.

Today, hundreds of "Hercules" robots do this instead, carrying towering yellow storage pods filled with inventory to employee workstations.

"I'd walk like 10 miles a day on average," said Mohammed Khan, who started as an entry-level picker 12 years ago and is now a senior manager at an Amazon warehouse in Tracy, California.

Amazon's robots "cut down all that walking time," he told Business Insider during a recent tour of the facility.

This site is ground zero for a wave of automation that's beginning to wash over the industry. The warehouse and logistics sectors have been powerful sources of job growth since Amazon kicked off the e-commerce revolution 30 years ago, as Business Insider's award-winning Warehouse Nation series revealed in 2022.

If robots automate many warehouse tasks, this powerful engine of job growth could grind to a halt, wiping out thousands of positions and countless opportunities for future workers.

Amazon says employees are being retrained to do more valuable work, such as managing and maintaining robots. Will these new jobs be enough to cover what might be lost? Or could we actually end up with more or better jobs?

Business Insider went looking for answers inside the giant facility in Tracy, a city in California's Central Valley where suburban neighborhoods give way to open farmland.

"Autonomous to an extent"

Across 1.4 million square feet — the equivalent of 23 football fields — robots with names like Hercules, Robin, Cardinal, Pegasus, and Proteus move inventory and sort packages. But they don't run the warehouse alone. Human workers still pick and pack orders, load trucks, and intervene when automated systems fail.

Jobs have not disappeared, but they're changing. Machines increasingly handle work that once required employees to walk miles and lift boxes, while workers monitor and troubleshoot them. The Tracy site employs more than 3,000, up from roughly 1,000 when it opened in 2023, an Amazon spokesperson told Business Insider.

"They're autonomous to an extent," Khan said of his robot counterparts. "They still need a lot of help and maintenance and oversight."

An Amazon spokesperson said rising customer demand drove the facility's workforce growth and that robots help workers process more packages safely and efficiently rather than simply replacing them.

Amazon's more automated, next-generation fulfillment centers are about 25% more productive and cut order-processing time by as much as 25%. And these sites support roughly 30% more skilled jobs in areas including reliability, maintenance, and engineering.

The "Quarterback" watches robots

One of the workers now doing that kind of job is Briana Brager.

She joined Amazon about two years ago as an entry-level employee after spending years caring for her family. She had no prior experience in a traditional workplace.

Today, she's a process assistant who helps oversee the warehouse's robotic systems. When a chute jams or a robot stops working, she coordinates the response to keep packages moving.

"The robots do a lot, but we still have to maintain them," she said.

Brager began as a picker before moving into a specialized role supporting robotic-floor operations. She got two weeks of intensive training, followed by additional job shadowing, to learn how to work safely around the equipment. Her current job is less physically demanding than her previous one, she said.

Her role is informally known as the "quarterback" position. She monitors fleets of robots and dispatches employees when a machine needs intervention.

"We call the shots," Brager said.

Meet Robin

At the Tracy warehouse, humans and robots move orders together from storage to the loading dock. Employees stow individual items in fabric inventory pods, which Hercules robots carry to pick stations. Workers retrieve the items, then pack and label them.

Robin, a large robotic arm, picks finished packages off a conveyor and places them on small Pegasus mobile robots. Pegasus carries the packages to staging areas alongside other orders headed to the same destination. Cardinal then loads the sorted orders into carts, and Proteus ferries the carts toward outbound trucks.

Khan, the warehouse manager, said workers performed Robin's task manually until a few years ago. They handled packages one at a time, checked them for damage, scanned them, and fed them into the sorting system. He estimated that one Robin can perform roughly the work of two to seven people doing that process manually.

Amazon said that when it introduces systems such as Robin, employees take on other work at the site, including operating robots, clearing jams, monitoring the robotic floor and quality control, and maintenance engineering.

Robots move the carts, too

Proteus offers a clear example of how these new warehouse jobs are taking shape. Amazon brought the robots to Tracy last year.

Unlike Hercules, which operates in fenced-off areas, Proteus can move through spaces shared with people. There are roughly 200 of the robots at the Tracy facility, Amazon said.

Before Proteus arrived, workers manually pushed carts filled with packages to the loading dock. Now the robots pick up full carts, carry them to staging areas near the dock, and retrieve empty carts for the return trip.

Some employees who once moved those carts now work as "ground-floor monitors," Amazon said. Instead of spending their shifts moving packages, they respond when a Proteus reports a fault. If the problem is simple, they can reset the robot; otherwise, human maintenance staff take over.

Some workers trained in these jobs have gone on to Amazon's mechatronics apprenticeship program, which can lead to more technical maintenance work.

When automation hits the "jackpot"

For all the robots moving through the Tracy warehouse, people remain essential when automation breaks down.

Amazon calls one such destination the "jackpot." When an item loses its routing information while moving through the facility, the automated system sends it to this area, which works a bit like a lost-and-found for packages.

Here, a human worker must determine where the wayward package belongs and return it to the correct flow. "It will require manual intervention," an Amazon representative said.

Other situations require human judgment, too. Products can fall from storage pods and inventory can be damaged or mislabeled. Packing individual products into boxes and loading them onto delivery vehicles are tasks that also remain heavily dependent on people.

This helps explain why even a highly automated Amazon warehouse still employs thousands of workers. The company said it needs people for new packing stations as well as roles across the facility that keep operations running safely and efficiently.

Current and future Tetris

By the time packages get to the loading dock at the Tracy facility, the robots are gone. At least for now.

A person loads each trailer. Amazon uses equipment that extends into the trailer and adjusts to a worker's height, reducing bending and back-and-forth walking. But workers still arrange the packages themselves, trying to fill the trailer to use as much of the space as possible.

"It's a lot of Tetris," one Amazon representative said.

Amazon is already exploring how to automate this task, though. As Business Insider previously reported, Project Tetromino aims to use AI and robotics to automate sorting and vehicle loading at delivery stations, where the work has long remained stubbornly manual.

But that vision remains a work in progress. Amazon's machines can carry shelves, sort packages, stack boxes, and move carts around people. Workers still pack orders, load trailers, perform quality checks, handle hiccups and exceptions, and keep the machines running when they fail.

For Amazon, the immediate payoff is not necessarily a warehouse with fewer people, but one where the same workforce can accomplish more. Tracy employs roughly the same number of people as a nearby Amazon facility with fewer robots, company officials said, but the Tracy location processes more volume.

Khan compared the technology to something far less futuristic: a calculator.

The robots streamline work that once consumed employees' time without necessarily eliminating the work itself, he said. "It's not that the amount of work has changed," he said. "It's how we approach it."

Asked whether robots could eventually replace more jobs, including his own, Khan did not try to predict the future.

"Who knows? That's not in our purview right now," he said. "But I would say roles are evolving, and that's the cool aspect about it."

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• Amazon shifts AI focus to business impact, not just raw usage, in new developer guidelines.
• The company warns that AI metrics can create bad incentives, including “tokenmaxxing.”
• Managers are told to examine teams at both the highest and lowest levels of AI adoption.

Amazon just issued new guidelines for software engineers in the AI era: Prioritize business outcomes over raw usage.

Terk Terkowitz, Amazon's vice president and distinguished engineer, said in a memo published Tuesday that AI is changing software development more quickly and fundamentally than earlier shifts such as cloud computing. But engineers should be judged by their impact on customers and the business, he wrote, not simply how much they use AI.

"We all need to embrace this change and take the time to learn, or we risk being left behind," Terkowitz said.

AI coding tools and agents are upending the software industry and changing what it means to be a coder. Amazon calls this the "era of the Renaissance Developer," where human judgement and machine intelligence combine to create new products and services faster and more efficiently.

"This is a time of change for our industry, and a time of change for what it means to be a software engineer," Terkowitz wrote in the memo.

The updated guidelines reflect Amazon's growing effort to make AI adoption part of how it assesses engineers and engineering managers. The company has tracked measures including AI usage, token consumption, and lines of code internally, and used leaderboards to rank teams by some of those metrics.

But the memo warns that using such measures as targets can produce bad outcomes, including "tokenmaxxing" rather than better software or customer experiences.

"Using these metrics could, if used as a target instead of a measure, drive negative outcomes," Terkowitz wrote in the memo.

Amazon has been experimenting with ways to measure and encourage AI use across its engineering organization.

Earlier this year, the company was tracking engineers's use of internal AI tools and some teams used leaderboards tied to measures such as token consumption. The programs created friction among some employees, who worried that pressure to use AI could reward wasteful activity rather than productive work.

The new guidance offers Amazon's clearest public acknowledgment of that risk. Rather than lay out a detailed AI playbook that could quickly become obsolete, Amazon said its revised developer guidelines focus on long-term impact on customers and the business.

Still, the company said AI should be "at the center of software engineering practice" and urged engineers to incorporate the technology into their daily work.

Leaders are expected to use AI tools on production work themselves, understand where they help and where they fall short, and explain that judgment to their teams, according to the memo.

Terkowitz said Amazon has found that metrics such as token use, AI-tool adoption, and code reviews can correlate with the outcomes it values. But he said the measures must be used carefully. More token use can raise costs, while a focus on lines of code can create unnecessary complexity.

He also recommended that managers pay particular attention to teams at both ends of the AI adoption spectrum: those in the bottom 10%, to understand why they are not using AI effectively, and those in the top 10%, to determine whether heavier use is translating into faster delivery.

Terkowitz said Amazon's most AI-forward "frontier teams" have shown stronger productivity and delivery. He also said teams and individuals that are not adopting AI or increasing output metrics are falling behind.

But his memo left room for engineers whose work may not yet benefit from current AI tools. In those cases, he said, employees should document why and work toward a solution by sharing their findings with peers and managers.

"An engineer who can explain where AI does not yet help their work is demonstrating the judgement we are asking for," the memo said.

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• Amazon launched a series of new devices this month, including Alexa tablets and Bee AI wearables.
• Rising memory costs forced "difficult trade-offs" on Amazon's device prices, sales, and profit.
• Amazon is seeking more Alexa revenue from enterprise sales, licensing, and ads.

Amazon launched a flurry of new consumer devices this month. Behind the scenes, rising memory costs are adding pressure to its already money-losing hardware business.

An internal planning document obtained by Business Insider shows Amazon forecasting a $612 million gross loss this year for its first-party devices business, compared with a leadership target of a $438 million loss.

The document said rising memory costs were "putting pressure" on the business's profitability, forcing "difficult trade-offs" among sales volumes, average selling prices, and gross profit.

The projected $612 million loss was at the gross profit level, meaning it did not account for all operating expenses, such as R&D, sales and marketing, and administrative costs.

The figures offer a rare glimpse into the pressure on Amazon's hardware business as it absorbs rising component costs. Other tech hardware companies, including industry leader Apple, face similar pressure from surging memory chip prices.

An Amazon spokesperson declined to comment.

A new wave of AI devices

Despite the pressure, Amazon continues to expand its consumer hardware lineup. Even if the company loses money on device sales, it can make money in other ways, such as subscription services, as more customers use its gadgets.

In October alone, the company introduced new Kindles, Alexa-powered tablets, Ring smart locks, and AI wearables under its Bee brand. The August planning document identified Bee and new smart glasses as strategic products still in an investment phase.

Amazon has historically used low-cost hardware to pull customers into a broader ecosystem of shopping and digital content. Rising component costs could make that strategy more expensive, forcing the company to raise prices.

The clearest shift is in Amazon's tablets. Earlier this month, the company phased out Fire tablets after 15 years and replaced the budget-friendly lineup with pricier Alexa Tablets powered by Alexa+. The new devices cost between $229.99 and $499.99, a notable increase from previous generations.

Not just Amazon

The planning document was prepared in August, the same month Amazon raised prices on products including Echo speakers, Kindle e-readers, and Fire TV devices.

The pressure extends beyond Amazon. Apple has raised prices on some Macs and iPads, while Microsoft and Sony have increased console prices. Dell, HP, and Lenovo also face higher memory costs.

The AI boom is helping drive the squeeze. Huge data center investments have increased demand for memory chips, while manufacturers have devoted more capacity to high-bandwidth memory used in AI servers. That has tightened supplies and raised prices for components used across consumer electronics.

Amazon is experiencing both sides of the boom. It expects roughly $220 billion in capital expenditures this year, largely to expand AWS data centers for AI demand, while higher component costs squeeze its consumer hardware business.

The rising cost of Alexa+

The August planning materials show Amazon reassessing both Alexa+ revenue and operating costs. They called for updated forecasts, expansion through enterprise sales and advertising, and more detailed AWS cost modeling.

Amazon is now confronting the cost of operating Alexa+ at scale. Business Insider reported in July that internal forecasts put Alexa+'s AWS cloud costs at roughly $1.7 billion in 2026, nearly triple the prior year's figure. Amazon was working to lower those costs by relying less on Anthropic's AI models and routing more requests to its own, cheaper systems.

A separate project called Moonraker, intended to give Alexa more advanced AI-agent capabilities, was projected to require more than $100 million in GPU spending this year. Amazon internally considered delaying or scaling back the initiative as one option for easing cost pressure, Business Insider previously reported.

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