AWS and Azure growth accelerates as cloud giants post strong results

But only Microsoft achieves positive cash flow

Amazon and Microsoft reported double-digit revenue growth, but infrastructure and AI spending continue to climb.

AWS and Azure both posted rapid growth in their latest financial results, helping Amazon and Microsoft to another quarter of rising revenues and operating profits.

AWS was Amazon's standout division, with Q3 revenue rising 39% year-on-year to $46 billion. That was AWS' fastest growth in nearly five years, putting it at a $184 billion annualised revenue run rate.

The cloud operation remains by far Amazon's most profitable sector. AWS generated $17.8 billion in operating income during the quarter, up from $11.4 billion a year earlier. Amazon's total operating income was $28.1 billion, meaning AWS accounted for well over half of the group's operating profit.

Overall Amazon net sales increased 12% year-on-year, from $180.2 billion to $201.9 billion. Net income went the other way, slipping from $21.2 billion to $20.7 billion. Amazon said the comparison was primarily affected by $9.5 billion in pre-tax gains from its Anthropic investments recorded in the equivalent quarter last year.

CEO Andy Jassy said AWS's investment in "functionality and infrastructure is working," pointing to the division's 39% growth and predicting revenue growth above 40% in both 2027 and 2028.

The spending required to support that expansion, however, is substantial. Amazon continues to expect around $220 billion in capital expenditure for 2026. Free cash flow fell to negative $42.4 billion over the trailing 12 months, which Amazon attributed primarily to a $94.8 billion year-on-year increase in purchases of property and equipment, net of proceeds and incentives.

The company said the increase mainly reflects investment in artificial intelligence, much like Alphabet.

Azure keeps accelerating

Microsoft reported similarly strong cloud growth for its first quarter of fiscal 2027, covering the three months to 30th September. Unlike its cloud competitors, though, the Windows maker retained a positive cash flow.

Revenue rose 19% year-on-year to $92.3 billion, while GAAP net income climbed 32% to $36.6 billion. Non-GAAP net income, which excludes the impact of its OpenAI investments, net income was $36.4 billion, up 18%.

Cloud was central again. Microsoft Cloud revenue reached $63.9 billion, up 30% YoY, while Azure revenue grew 48% year-on-year. Microsoft does not give an absolute quarterly revenue figure for Azure.

The company's newly reported Agents and Infra segment generated $76.8 billion, up 25%. Microsoft said its commercial remaining performance obligation, a measure of contracted revenue yet to be recognised, increased 73% to $677 billion.

Elsewhere, Microsoft 365 commercial cloud revenue increased 17%, as did consumer cloud revenue. Industry solutions cloud revenue grew 10%.

The picture was less rosy in Microsoft's consumer businesses. Devices and Consumer revenue fell 3% to $15.5 billion, with Windows OEM and Devices revenue down 22% and Xbox content and services revenue declining 2%. Search and advertising revenue, excluding traffic acquisition costs, grew 12%.

CEO Satya Nadella said Microsoft was seeing growing adoption across its technology stack, while CFO Amy Hood highlighted the acceleration in Microsoft Cloud growth to 30%.

Cloud growth is accelerating at both Amazon and Microsoft. AWS's 39% rise was its fastest in nearly five years, while Azure grew 48%. At the same time, the scale of Amazon's infrastructure spending illustrates the other side of the current cloud and AI expansion: maintaining that growth requires increasingly large amounts of capital.