Amazon (AMZN.US) AWS growth failed to meet the expected 42%, Goldman Sachs: profit exceeded expectations and provided support

According to Woofun AI, Goldman Sachs (GS.US) highlighted the growth gap of AWS as a core observation point in its quick review of Amazon's (AMZN.US) earnings report released on October 29, 2026. Although the cloud business performed strongly, the actual growth rate of 39.3% failed to surpass the buy-side's threshold of over 42% growth, resulting in a negative initial market reaction as investors were disappointed by the gap between high expectations and robust growth.

In-depth analysis of the cloud business shows that AWS achieved revenue of $45.98 billion in the third quarter. While this figure surpassed both Goldman Sachs’ and sell-side consensus forecasts, it still fell short of the repeatedly emphasized buy-side expectation of over 42% growth before the earnings report. The difference between these two sets of expectations is a key clue to understanding short-term market sentiment. Goldman Sachs pointed out that the company's forward commentary refers to AWS growth targets of about 40% in 2027 and 2028, indicating that the market focus has already shifted from whether there is demand to the efficiency of additional computing capacity services.

Data compiled by Woofun AI shows that Goldman Sachs listed computing power supply as a key point in the conference call, because client demand must be met by available computing capacity, and the rhythm of adding new capacity directly affects the speed of sales recognition. Demand visibility, construction progress, and revenue release must closely coordinate along the same growth trajectory.

In addition, Goldman Sachs closely monitors the strategic deployment of Bedrock and Trainium. The former serves as Amazon's generative AI service platform, while the latter is Amazon's self-developed AI training chip. These initiatives aim to capture industry AI spending through services and infrastructure and respond to ever-changing market demand.

Regarding overall financial performance, Amazon's total revenue for the third quarter was $201.94 billion, up 12.1% year-on-year, slightly higher than Goldman Sachs’ forecast of $201.51 billion but lower than the market consensus of $202.35 billion. Sales volume was close to original expectations, with operational highlights mainly concentrated on profits. According to US GAAP, operating profit reached $28.1 billion, not only surpassing the market expectation of $26.16 billion but also exceeding the company’s previous guidance upper limit. The overall operating margin was 13.9%, demonstrating strong profitability against a backdrop of steady revenue growth.

By business segment, AWS's operating profit was $17.77 billion with a margin of 38.7%, making a significant contribution to overall profits; North America’s operating profit was $8.72 billion with a margin of 7.7%; international business operating profit was $1.58 billion with a margin of 3.7%. Goldman Sachs identified cloud, advertising, third-party merchant services, and subscriptions as high-margin business expansion directions, and their growth rates directly impact the group’s ability to convert sales growth into profits. Online store third-quarter revenue was $68.47 billion, up 1.6% year-on-year, while third-party merchant services revenue was $46.49 billion, up 9.4% year-on-year. The difference in growth rates highlights the group's different focus between platform services and product retail.

Subscription service revenue was $14.01 billion, up 11.4% year-on-year; advertising service revenue was $19.64 billion, up 10.9% year-on-year. These businesses are closely linked to consumers, merchants, and platform traffic, impacting not only the income structure but also the stability of group profitability. Goldman Sachs listed consumer health as a focus in the conference call, arguing that consumer demand will transmit to product sales, merchant operations, and ad placement, while also monitoring changes in smart agent shopping, exploring how AI agents are affecting commercial activity and the evolution of how consumers find and purchase goods.

Regarding forward guidance and investment recommendations, Amazon reaffirmed its capital expenditure of about $220 billion in 2026. Goldman Sachs listed future capital needs, spending arrangements, and computing power expansion financing methods as important tracking items. Continued construction provides conditions for growth but also demands higher cash investment and operational returns. Fourth-quarter total revenue guidance is $240-247 billion, including a 0.6 percentage point negative impact from exchange rates. The market consensus is $244.4 billion, within the guidance range, indicating the company's revenue scope overall covers previous market expectations. Operating profit guidance is $28.5-33.5 billion, with the market consensus at $32.9 billion. Goldman Sachs noted that the upper end of the range slightly exceeds consensus, but the implied operating margin midpoint is 12.7%, below the market expectation of 13.5%. The flexibility of the profit guidance needs to be understood in the context of ongoing investments.

Goldman Sachs maintains a buy rating with a 12-month target price of $375, while listing intensifying competition, less-than-expected expansion of high-margin businesses, and new business investments pressuring profit margins as major risks. The company must maintain cloud business competitiveness while ensuring growth in advertising, subscriptions, and merchant services. Group profits depend on the joint contribution of multiple business results. Divergence in this earnings report is concentrated between strong growth and high expectations. Computing power construction determines AWS's growth ceiling, while retail and advertising decide the space for profit retention. Amazon's next priority is to effectively link computing power construction, business growth, and profitability, delivering on both fronts simultaneously.