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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.
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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Microsoft reduced its forecast for capital expenditure, a rare move in an industry that mostly continues to splurge more on huge AI investments.
The software giant said capex for the 2026 calendar year will be $170 billion from a previous forecast of $175 billion.
Chief Financial Officer Amy Hood gave the forecast on the company's fiscal first-quarter earnings call on Wednesday.
She said Microsoft was expecting new capacity to arrive from third-parties, but some of these "GPU-as-a-Service contracts" have been delayed until the second half of the fiscal year.
This likely refers to other providers of AI cloud services that use Nvidia GPUs to run their offerings. Microsoft has partnered with some outside providers to meet rampant AI demand.
Hood's comments could refer to a recent spate of AI data center project delays, which have mostly been caused by a lack of electricity, along with local opposition.
The CFO said Microsoft expects capex to accelerate in the second half of its fiscal year, as the delayed capacity kicks in.
Wall Street has become increasingly concerned the huge investments cloud companies are making to expand AI infrastructure. Microsoft last quarter kept its forecast unchanged, notable as many cloud giants have been steadily increasing their AI spending forecasts.
Overall, Microsoft reported $92.3 billion in revenue, up 19%, for the fiscal first-quarter ending Sept. 30. Azure cloud revenue was up 48% to more than $33 billion, surpassing Wall Street expectations.
Microsoft share were up about about 3% in after-hours trading following the earnings call.
Earlier this week, Microsoft offered a buyout to more than a quarter of its workforce. A Microsoft spokesperson told Business Insider on Wednesday that the company expects 5% of eligible employees at most to accept the buyout.
"We expect very few people to select this offer because of the growth opportunities here at Microsoft," Hood wrote in an internal memo viewed by Business Insider. Microsoft's headcount slipped 2% during the fiscal first quarter, the company reported.
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Timothy Hiatt/Getty Images/The Cheesecake Factory
The Cheesecake Factory's moment in the spotlight just got a little sweeter.
The California-based restaurant chain reported solid third-quarter earnings on Tuesday, a few days after getting dragged into a political feud that's become bigger than its famously large portion sizes.
It all started after former president Barack Obama stirred the pot on Saturday when he compared President Donald Trump's White House renovations to Saddam Hussein's take on a Cheesecake Factory, prompting Republicans to seize on the comments and defend the chain.
Amid the firestorm, The Cheesecake Factory reported quarterly revenue of $1.03 billion, up nearly 14% year-over-year, while comparable sales at its restaurants rose over 15% year-over-year.
CEO David Overton credited the chain's new menu items, rewards program, and social media engagement for the growth in sales.
"The Cheesecake Factory has long enjoyed tremendous brand affinity across generations, and its ability to attract younger guests reinforces the enduring appeal and relevance of our namesake concept," Overton said.
Executives did not address the feud during the earnings call Tuesday, and the company has not publicly commented on it.
The company's fiscal third quarter ended September 29, before Obama's comment, so any potential boost the chain gets from the current headlines may be icing on the cake.
The food fight started after Obama invoked The Cheesecake Factory while mocking Trump at a campaign rally in Cleveland on Saturday.
"He's got the White House looking like Saddam Hussein opened a Cheesecake Factory. There's gold everywhere," Obama told the crowd, referring to the gold accents and furnishings Trump has added to the Oval Office. "He's clearly not focused on lowering prices for you."
The White House seized on the comment, while Republican commentators said it showed Obama was an elitist who's out of touch with most Americans.
Treasury Secretary Scott Bessent visited a Cheesecake Factory for lunch on Monday and said he got his usual: the French dip cheeseburger.
"I would tell the Martha's Vineyard set to give it a try," Bessent told Fox Business. He also took a jab at Obama's taste in design, comparing his newly opened presidential library to "Darth Vader's tomb."
Trump, of course, got a piece of the pie as well.
"The White House is now in the best shape it's been since 1792 when it was built," Trump told reporters on Monday, sprinkling in a direct message for Obama: "For you to say it's The Cheesecake Factory, that just shows why you were a lousy president."
Only time will tell if Obama and Trump go back in for seconds.
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