AWS revenue rose 39% to $46 billion. Amazon spent $77.3 billion on capital expenditures in the quarter.
Growth is visible. So is the cash going out to build more capacity.
The Financial Times reported that Amazon, Meta, Microsoft and Alphabet lost nearly $900 billion in market value after their third-quarter results. Their capital expenditures almost doubled, and all four shares fell.
Amazon’s Growth Has a Cash Cost
Amazon kept its full-year cash capital spending plan at $220 billion. Its quarterly spending was above expectations of $57.5 billion, and free cash flow over the past twelve months was negative $42.4 billion.
AWS is growing quickly. Management projected growth above 40% in both 2027 and 2028. One commentator reported a backlog of 578 billion and said capacity coming online, rather than demand, was limiting revenue growth.
That gives the AWS growth weight. The same commentator’s account suggests more capacity could help Amazon serve more of its contracted business. It does not yet answer how much cash that capacity will produce.
Amazon’s operating margin reached 13.9%, which one commentator called its highest ever. Advertising revenue was $19.6 billion, below expectations of $20.87 billion. Commentators said Prime Day’s move from the third quarter last year to the second quarter this year made the retail and advertising comparisons harder to read.
Advertising Is Growing, and So Are Compute Costs
Meta’s revenue rose 26% to $64.6 billion. Ads shown rose 10%, and the average price per ad rose 14%.
Costs and expenses rose 68%. Operating income fell 37% after a $9.89 billion legal charge. Meta set a capital spending outlook of 135 to 145 billion and said it expected to keep investing aggressively in 2027.
Meta also introduced Muse, a personal agent app with a free tier and monthly plans of $20 or $100. Meta says it can handle digital tasks. The company is exploring whether to take a cut of shopping transactions made through the agent, but it has not settled on a plan.
Alphabet’s Q2 update showed 24% revenue growth and 82% Google Cloud growth. A separate commentator described a later quarter with 103% Google Cloud growth, 42.3 billion of operating cash flow and more than 51 billion of spending on property, plant and equipment.
That commentator said AI Mode searches currently earn less than traditional searches. Another commentator argues that Meta could benefit if advertisers move spending away from search. No such move in ad budgets was reported.
Microsoft reported 92 billion of revenue and 58 billion of operating cash flow, alongside 39 billion of spending on property, plant and equipment. The spending question also reaches companies that have not yet reported earnings.
In one commentator’s account of Anthropic’s proposed IPO, first-half revenue was 16.3 billion, its operating loss was 693 million, and compute cost 8.9 billion. The commentator cited roughly 850 billion of compute commitments through 2045, with around half locked in.
Reports cited by that commentator put Anthropic’s target valuation between 1.5 and $2 trillion. The company’s filing, as described in the account, warns of cheaper open models, possible future export restrictions and falling margins as new compute deals begin. The revenue is large, but the commitments and risks belong in the same picture.
Inflation Adds Another Pressure Point
September PCE inflation was 3.6% from a year earlier, while core inflation was 3.1%. U.S. Q3 GDP grew at a 3.4% annualized rate, and weekly jobless claims were 194,000. Brent oil was near $115 to $117 amid the Middle East conflict, adding to inflation pressure.
Fed officials Musalem and Barkin favored higher rates. The Fed chair said price stability had not been achieved and gave no firm conclusion on the next rate decision. One commentator says the Fed lacks an effective plan. That is the commentator’s assessment, not the chair’s conclusion.
The Nasdaq fell about 3%, and the S&P 500 fell 1.8%. Intel fell about 29% after a weaker-than-expected outlook tied partly to sluggish PCs. Reddit fell 29% despite 53% revenue growth, warning that fewer search referrals could reduce daily active users.
Bloomberg reported that Apple regained the title of world’s most valuable company from Nvidia as investors sought its perceived safety amid concern about AI spending. The results were mixed elsewhere: SanDisk beat revenue and earnings estimates and announced a $5 billion share repurchase, while Rivian rose more than 6% after 38% revenue growth and a smaller-than-expected loss.
Growth Still Has a Price
A ServiceNow comparison listed the same $130 share price five years ago and “right now,” despite higher revenue, adjusted EBITDA, net income and free cash flow. One commentator called Booking cheap at 18 times earnings but said the risk of AI disruption kept them from buying it.
Another commentator pointed to the S&P 500 price-to-book ratio rising from below two to above six over 17 years and argued that investors get little value for the prices they pay. A separate commentator questioned an Anthropic valuation of $2 trillion against Google at $3.5 trillion.
These are different views of price risk. Big Tech’s results leave a more direct question: how much cash will the new AI capacity eventually produce?