Amazon Web Services is expanding faster than it has in roughly five years, and management is telling investors the pace can pick up further. AWS growth accelerates to 39% in the third quarter, and Chief Executive Andy Jassy expects the division to exceed 40% in both 2027 and 2028, according to the company’s latest update.
The confidence is anchored in demand that Amazon says is already contracted. AWS carries a $578 billion backlog, and that figure is climbing at a triple-digit rate. Management frames the spending on capacity as a response to signed commitments rather than a speculative bet.
What the Backlog Says About Future Growth
The backlog represents work customers have committed to, which helps explain why Amazon keeps pouring money into data centers and custom silicon. That investment has raised questions about whether heavy capital outlays would weigh on profitability. The latest quarter offered a counterpoint: Amazon recorded its highest operating margin ever.
Analysts have started to model the profit implications of the revenue surge. On October 29, UBS analyst Stephen Ju projected AWS operating margins of 46% in 2027, a forecast that sits above the consensus view on Wall Street. KeyBanc Capital Markets analyst Justin Patterson argued that AWS is well placed to capture AI demand, spanning enterprises rethinking their workflows and new consumer-facing assistants.
Chips and Bedrock Add Momentum
Amazon’s in-house processors are becoming a larger part of the story. Customer commitments for Trainium and Graviton chips multiplied several times over compared with a year earlier, the company said. Those chips are central to Amazon’s effort to offer AI compute without depending entirely on external suppliers.
On the software side, Bedrock, which lets companies build applications on top of AI models, has become the fastest-growing multibillion-dollar service in AWS history, according to Jassy. The combination of infrastructure and tools gives Amazon multiple ways to monetize the same wave of enterprise AI adoption.
Market Context Around the Results
The update arrived during a turbulent stretch for equities. The Dow Jones Industrial Average had fallen 3.4%, or more than 1,800 points, while the S&P 500 dropped 4.4% and the Nasdaq Composite slid 5.5% into correction territory, with chip stocks absorbing the heaviest losses. The sell-off followed a rally tied to midterm election results, and volatility spiked sharply before a partial rebound after October payrolls showed 165,000 jobs added.
Amazon has also drawn attention for its valuation and its broader ambitions. The company trades at roughly 24 times forward earnings, and analysts have debated whether its cash-generating businesses can support newer ventures. On the AWS side, the question is whether the current acceleration can persist at the scale management is projecting.
The numbers management has put forward are ambitious: 39% growth now, above 40% expected in 2027 and 2028, a $578 billion backlog rising at a triple-digit clip, and a record operating margin. For investors, the central issue is whether those commitments convert into revenue quickly enough to justify the capacity being built.