Key points from $Amazon(AMZN.US) earnings call:CEO

Key points from $Amazon(AMZN.US) earnings call:

CEO Andy Jassy: "I think we're still in the relatively early stages of how much demand there's going to be for AI."

AWS:

- Fifth straight quarter of AWS acceleration and fastest growth in 18 quarters.

- AWS revenue was $42.2B (+37% YoY), and growth was about 80% more than Amazon's largest increase ever.

- Accelerating off a 2x larger base means the absolute dollar adds are unprecedented.

- Backlog is $496B which is ~2.5x Q3'25 level which derisks the capex fairly significantly.

- "The lion's share of capacity in 2027...is largely reserved. And we have quite a bit of capacity that's already been reserved for 2028"

- Trainium: "the two leading AI labs in the world, Anthropic and OpenAI, making multi-year, multi-gigawatt commitments"

- Amazon also predict that AWS could be a $1T annual revenue business. At current growth rates, it looks like that could actually happen by 2030.

Capex / FCF:

- Raised 2026 capex by $20B to ~$220B. Surging memory costs are the key driver. $Apple(AAPL.US) also confirming on their earnings e.g. "For September, we expect to pay even higher memory costs."

- TTM FCF now -$7.6B because of ~67B long-term issuance in H1. "You've seen us issue debt this year... we have a lot of options available to us".

- "If the demand isn't there, we won't spend the capital for servers and networking equipment" - positive signals on surging demand.

- "We will still not have enough capacity to meet all the demand we have in 2026. And I believe this dynamic will also be true in 2027 too."

Demand shape:

- AI labs "consuming gobs and gobs of compute" like Anthropic and OpenAI.

- Current enterprise production workloads "will be the largest absolute segment"

- "Enterprises are still very early in using inference at scale in their current production applications"

Summary:

- Same message as $Alphabet(GOOGL.US), $Microsoft(MSFT.US) and $Meta Platforms(META.US) where demand exceeds supply through 2027 at least.

- Binding constraint is capacity.

- $496B of contracted backlog against capacity sold out two years forward just confirms demand > supply.

Very good earnings overall in my opinion.

Glad that the markets didn't look at the negative FCF in a bad way when you consider a contracted backlog of $496B is being built/supplied against it.

Maybe the best hyperscaler earnings this quarter?