• 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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• Many Americans are not happy about AI data centers and say they plan to vote accordingly.
• In a Gallup poll, 30% of respondents said AI data centers are "extremely important" in how they vote.
• AI data centers, however, are not the issue they care about the most.

Many Americans are worried about AI data centers — and they plan to vote accordingly — but the colossal AI-powering warehouses aren't their main concern ahead of next week's midterm elections.

In a Gallup poll released on Thursday based on interviews conducted earlier this month, about 30% of respondents ranked "construction of AI data centers" as an "extremely important" factor in their midterm calculus.

Another 23% ranked the issue as "very important."

When separated by political party, Republicans emerged as the group more apathetic to data centers. Only 16% of registered Republicans said they considered the issue extremely important, compared to 42% of registered Democrats.

In the poll, Gallup surveyors did not ask voters for their opinions on issues like data centers — only the extent to which they were considering each issue when they vote next week.

Overall, the state of the economy, healthcare, and the "situation in Iran" emerged as the most important topics for voters.

The massive server factories powering chatbot queries had a disastrous PR run over the last year, and have been the subject of protests across America at local town hall meetings and major rallies in Washington.

Some states have passed data center moratoriums, prohibiting their construction. Texas Gov. Greg Abbott, once a champion of AI data center expansion, said in August that the state had halted as many as 1,800 data center proposals.

President Donald Trump, who has championed a national effort to build out AI infrastructure, said in August that data centers "could use a little public relations help." He encouraged major builders, including Meta, Microsoft, and Amazon, to do more for the communities where they are planned.

As the midterms approach, however, concern over AI data centers has given way to more pressing issues for voters, like the Iran war, rising energy prices, and the overall health of the economy.

The data center issue ranked 10th among the topics polled by Gallup, just ahead of climate change at 11. A whopping 87% of voters consider the economy an important issue, followed closely by healthcare at 77%.

In a September poll by the Pew Research Center, which surveyed people in August, half of rural Americans said data centers "are mostly bad for the environment" — a figure substantially higher than in January, when it sat at 32%.

For AI companies like OpenAI, Anthropic, Meta, Google, and others, the issue is existential. Without AI data centers, they can't power the products they sell. Sam Altman has recently suggested that new data centers could be built far from where people live, like the desert.

"We should just go put it off in the desert, around no one where no one wants to be," Altman said in July. "This is fine. The AI system is very happy to be there."

• Mark Cuban says data center developers are using healthcare-style contracts to confuse communities.
• He said healthcare contracts are "so big and so long" that insurers "get to be contractual terrorists."
• Data centers, which are crucial for the AI boom, have become a hugely contentious issue across America.

Healthcare has long used complex contracts that can obscure who pays for what. Mark Cuban says data center developers are using a similar playbook.

"A lot of communities have been really dumb with the deals they've negotiated for data centers," Cuban said on an episode of "The A16z Show" released on Wednesday. "They've fallen for the contractual terrorism in a lot of cases."

Cuban, who co-founded Cost Plus Drugs, a company that sells generic medicines at a transparent markup, previously coined the phrase "contractual terrorism" while discussing healthcare.

On the A16z podcast, he said massive healthcare insurers and their subsidiaries use sprawling, opaque agreements to obscure costs and make it difficult for employers to know where their money is going.

Cuban said those contracts are "so big and so long" that insurers "get to be contractual terrorists" — a formulation he also applied to communities' data center deals.

His comments come as the data center boom has become a hugely contentious issue in communities across the US.

Residents living near facilities have reported incessant low-frequency hums, diesel smells, intrusive lights, construction disruption, pressure on water and electricity supplies, and the loss of trees and open land.

In Northern Virginia, the country's data center capital, local opposition has helped reshape elections, prompted lawsuits, and pushed residents to demand tighter noise and zoning rules.

A University of Massachusetts Amherst poll of 1,000 Americans from September found that 65% opposed building an AI data center in their local community, including 49% who said they strongly opposed it.

The ghost data center backlash

The race to build AI infrastructure has also produced far more announcements than operating facilities.

Aterio, which tracks projects through satellite imagery, permits, and other records, counted 8,268 announced US facilities as of October 20. But only 2,126 were active, and 861 were under construction.

Thousands more had just been announced, leaving local governments to negotiate consequential long-term agreements for projects that may never progress beyond a press release.

That is a risk Cuban has warned about.

In a series of X posts in September, he laid out a 10-point playbook for communities considering their first data center, arguing that every promise from a developer should come with a measurable limit, independent oversight, financial backing, and a remedy if it is broken.

Cuban's advice is to settle those questions before construction begins.

"Resolve it before granting the approval that spends the last of the town's leverage," Cuban wrote at the time.

• Treasury Secretary Scott Bessent isn't rattled by the neocloud debt debate that has spooked investors.
• He said AI-related debt isn't "problematic at all" and just a small part of the AI ecosystem.
• Neocloud stocks have slumped amid concerns over mounting debt and uncertain AI investment returns.

Treasury Secretary Scott Bessent weighed in on the neocloud debt debate that recently rattled the AI trade, and he doesn't seem too concerned.

In a CNBC interview Wednesday, Bessent was asked about yields on some AI-related debt climbing into the double digits. The secretary replied, "We monitor all of this."

"I don't think it's problematic at all, because we're seeing that that's the neoclouds are a small component of the overall ecosystem," Bessent added.

He said financing was still getting done, as were deals, and pointed to companies like Meta choosing to finance with equity.

The neocloud industry, which includes players such as CoreWeave and Nebius, provides cloud computing services to AI customers. It's been one of the most talked-about topics in AI over the past week.

The companies have signed multibillion-dollar deals with hyperscalers. Nebius, for example, signed a deal worth over $17 billion with Microsoft last September. In March, it announced a five-year contract with Meta that could be valued at up to $27 billion.

But the industry has come under pressure over the past few weeks, as investors fret about mounting debt levels, rising borrowing costs, and whether AI spending will produce sufficient returns. CoreWeave shares fell by nearly 40% in October, but have recovered slightly from its October 23 low. The Roundhill Neocloud ETF, which invests in major neocloud players such as CoreWeave, Nebius, and IREN, has fallen 24% over the past month.

Elon Musk added to those concerns in an X post on Sunday. He wrote that many neoclouds will face "guppy-level death and consolidation," and that debt markets are hesitating to fund companies that rely almost entirely on AI data centers for revenue. He added that SpaceX would not be acquiring any neocloud companies.

But Nvidia CEO Jensen Huang, whose company has backed several major neocloud providers, offered a more optimistic assessment last week. Earlier this month, he told CNBC that demand for them is "off the charts" and that they have "extraordinary" capabilities.

• Microsoft lowered its 2026 capex forecast to $170 billion, down from $175 billion.
• CFO Amy Hood cited delays in third-party capacity as Wall Street scrutinizes returns on AI spending.
• Azure revenue jumped 48%, beating expectations, while Microsoft's headcount fell 2%.

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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