Amazon Cloud Services Sells Out Capacity Through 2027 Amid AI Boom
Seattle, Wednesday, 28 October 2026.
Surging artificial intelligence demand has completely booked Amazon Web Services capacity through 2027, leaving the company with a massive $496 billion contract backlog ahead of Thursday’s critical earnings report.
AWS Capacity Constraints Signal Infrastructure Bottleneck
Amazon Web Services (AWS), the cloud computing arm of Amazon.com Inc. (NASDAQ: AMZN), is facing unprecedented demand for its infrastructure, with data center capacity fully booked through 2027 and a significant portion of 2028 already allocated [1]. This capacity crunch comes as corporate clients increasingly rely on AWS for artificial intelligence (AI) workloads, including training and inference for large language models. The company’s CEO, Andy Jassy, has publicly acknowledged that AWS could invest even more in AI infrastructure without it being ‘a bad use of capital’ [1]. However, the current supply constraints are forcing Wall Street to scrutinize Amazon’s capital expenditure (capex) strategy and its ability to meet surging demand while maintaining profitability [1][6].
Earnings Preview: Investors Await Cloud Growth Metrics
Amazon is set to report its third-quarter earnings on Thursday, October 29, 2026, after market hours, with analysts expecting revenue of approximately $202 billion, representing a 12% year-over-year increase [1][2]. The company’s guidance had projected sales between $197 billion and $202 billion, with operating income expected to range from $22.5 billion to $26.5 billion [2]. However, the year-over-year comparison is complicated by the shift of Prime Day from Q3 2025 to Q2 2026, which is expected to reduce third-quarter sales growth by nearly 4 percentage points [1]. Investors will closely examine AWS revenue, which is projected to reach $45.4 billion in Q3, a 37.5% year-over-year increase [1][2][4]. This follows a 37% jump in AWS revenue during Q2 2026, marking the fastest expansion in 18 quarters [2].
Capital Expenditures Under the Microscope
Amazon’s aggressive investment in AI and cloud infrastructure has raised concerns about its free cash flow, which turned negative to the tune of $7.6 billion for the 12 months ending in June 2026 [1]. The company now expects to spend approximately $220 billion on capital expenditures in 2026, up from an earlier plan of $200 billion, driven largely by AI and cloud infrastructure demands [1]. While AWS revenue is projected to grow to $45.4 billion in Q3, the $220 billion capex figure is drawing significant attention, particularly as it raises questions about whether the growth in AWS can justify the massive outlays [1][2]. Analysts from firms like Wedbush and Zacks expect AWS revenue to grow between 37% and 41% in Q3, but the sustainability of such growth amid capacity constraints remains a key concern [1][2][4].
AI Partnerships and Contract Backlog Highlight Long-Term Commitments
The booking of AWS capacity through 2027 and into 2028 is largely attributed to long-term contracts with AI labs such as Anthropic and OpenAI, which have committed to spending billions on Amazon’s computing capacity. Anthropic alone has committed to spending at least $110 billion on Amazon’s computing capacity into the 2030s and has requested even more computing power than AWS is currently supplying [1]. As of June 2026, AWS had $496 billion in signed, undelivered contracts, underscoring the scale of its backlog and the confidence clients have in its infrastructure [1]. Additionally, Amazon’s custom Trainium AI chips, which have attracted multiyear commitments from OpenAI and Anthropic, are expected to play a pivotal role in supporting the growing demand for AI workloads [2].
Market Sentiment and Stock Performance Ahead of Earnings
Amazon’s stock has risen approximately 10% year-to-date, though it has underperformed the S&P 500’s 11% gain and the Nasdaq’s 14% return. Over the past three years, Amazon’s stock has delivered a 91% return, slightly trailing the Nasdaq’s 107% advance but outperforming the Zacks Internet-Commerce industry’s 62% gain [5]. Options pricing suggests that Amazon shares could swing up to 7% in either direction following the earnings report, with a move of that magnitude potentially pushing the stock above $270 or below $236 based on Tuesday’s close of $254.60 [4]. Analysts remain overwhelmingly bullish on Amazon, with all 18 analysts tracked by Visible Alpha calling the stock a ‘buy’ and an average price target of $335, implying roughly 33% upside from Tuesday’s close [4].
Broader Implications for the AI and Cloud Industries
The challenges facing AWS are not unique to Amazon, as other tech giants like Microsoft and Alphabet are also reporting earnings this week, with Microsoft scheduled to report on October 28, 2026, and Alphabet on October 29, 2026 [1]. The AI infrastructure race has become a defining theme of 2026, with companies like Meta also facing scrutiny over their capital allocation strategies following a 9% drop in its stock price after free cash flow turned negative [5]. For Amazon, the critical question is whether its AWS growth can outpace its capex investments and sustain investor confidence. The company’s ability to manage capacity constraints while delivering on its long-term contracts will be closely watched, as will its guidance for 2027 capex and AWS growth [1][2][4].