Goldman Sachs Report Analysis: AWS Growth Nears 40%, Amazon Still Must Clear Higher Expectations

By Rita

Before the earnings report, buy-side investors raised the growth threshold for AWS to over 42%. Amazon ultimately delivered a 39.3% growth rate. In its fast reaction note on Amazon's earnings dated October 29, 2026, Goldman Sachs listed this shortfall as a key observation point. Despite strong cloud business growth, it may still disappoint investors who had higher expectations.

Goldman Sachs anticipates a initially negative market reaction to the earnings report. The note focuses on the alignment between cloud business growth, compute capacity deployment, and capital expenditures. Amazon needs to convert sustained investments into sufficiently rapid revenue growth while maintaining overall profitability.

AWS Faces Higher Growth Thresholds

AWS third-quarter revenue was $45.98 billion. Goldman Sachs pointed out that this result exceeded both its own and sell-side consensus estimates, yet fell short of the over-42% growth level frequently discussed by buy-side investors ahead of the report. The gap between these two sets of expectations provides a crucial clue for understanding the short-term market reaction.

The note also mentioned that management's forward guidance references approximately 40% AWS growth in 2027 and 2028. Consequently, Goldman Sachs continues to emphasize the cloud business's mid-term expansion capabilities. Market discourse has shifted from whether demand exists to how quickly new compute capacity can service that demand.

This is also why Goldman Sachs highlighted compute supply as a key topic during the earnings call. Client demand must be met with available compute capacity, and the deployment of new capacity will affect the pace of revenue recognition. Demand visibility, construction progress, and revenue release need to align along the same growth trajectory.

Goldman Sachs also tracked Amazon's positioning with Bedrock and Trainium. The former is Amazon's generative AI service platform, while the latter is its self-developed AI training chip. The report links these initiatives to industry demand shifts, monitoring how Amazon plans to absorb AI spending through services and infrastructure.

Profitability Beat Supports Operations

In the third quarter, Amazon's total revenue reached $201.94 billion, up 12.1% year over year. Goldman Sachs forecasted $201.51 billion, while market consensus was $202.35 billion. Sales scale was close to original expectations, with the company's operational highlights primarily reflected on the profit side.

Calculated under US GAAP, operating profit was $28.1 billion, exceeding the market expectation of $26.16 billion and surpassing the company's prior guidance ceiling. The overall operating margin stood at 13.9%. With stable revenue growth, Amazon delivered a robust result on the profitability front.

On a segment basis, AWS operating profit was $17.77 billion with a margin of 38.7%. North America operating profit was $8.72 billion with a margin of 7.7%, while International operating profit was $1.58 billion with a margin of 3.7%. The critical importance of the cloud segment to overall profitability is clearly evident in these figures.

Given this, Goldman Sachs' focus on Amazon consistently encompasses the business mix. Cloud, advertising, third-party seller services, and subscriptions are all listed in the report as directions for high-margin business expansion. Their growth rates will impact the group's ability to convert sales growth into profits.

Retail Growth Still Requires Granular Management

Online Store revenue for the third quarter was $68.47 billion, up 1.6% year over year. Third-party seller services revenue reached $46.49 billion, up 9.4%. The significant difference in growth rates between these two lines indicates that platform services and retail each play distinct roles within the group.

Subscription services revenue amounted to $14.01 billion, up 11.4% year over year; advertising services revenue totaled $19.64 billion, up 10.9%. These businesses are tied to consumers, merchants, and platform traffic, influencing both the revenue mix and the stability of the group's profitability.

Goldman Sachs listed consumer health as a key area of interest during the earnings call. For Amazon, consumer demand impacts product sales, merchant operations, and ad spend. Viewing these segments collectively makes it easier to understand how retail-side demand flows through to platform services.

The note also examined changes in smart agent participation in shopping. Goldman Sachs sought to understand how AI agents have already impacted commercial activities and how horizontal and vertical agent behaviors will evolve. This topic extends the discussion on retail from near-term consumption patterns to how consumers search for and purchase goods.

Capital Expenditures Test Growth Realization

Amazon reiterated that capital expenditures for 2026 will be approximately $220 billion. Goldman Sachs identified future capital requirements, spending allocations, and financing methods for compute expansion as key tracking items. Continued investment creates conditions for growth but also imposes demands on cash deployment and operating returns.

Fourth-quarter total revenue guidance is set between $240 billion and $247 billion, incorporating a 0.6 percentage point headwind from foreign exchange rates. Market consensus stands at $244.4 billion, falling within the range. The company's revenue guidance overall covers previous market expectations.

Operating profit guidance ranges from $28.5 billion to $33.5 billion, with market consensus at $32.9 billion. Goldman Sachs noted that while the upper bound slightly exceeds consensus, the midpoint implies an operating margin of 12.7%, below the market expectation of 13.5%. The flexibility shown in the profit guidance needs to be understood alongside ongoing investments.

Goldman Sachs maintains a Buy rating with a 12-month target price of $375. Risks cited include competition, underperformance in high-margin business expansion, and new business investments weighing on margins. The company must maintain competitive strength in its cloud business while sustaining growth in advertising, subscriptions, and seller services. Group profitability hinges on the combined contributions of multiple operational outcomes.

The divergence surrounding this earnings report centers on the gap between strong growth and high expectations. Compute capacity deployment determines how fast AWS can run, while retail and advertising determine how much profit can be retained. Amazon's next focal point is to integrate compute infrastructure, business growth, and profitability returns, delivering results on both fronts simultaneously.

Disclaimer

This article is a compilation and interpretation by TechFlow Research of a third-party broker research report (Goldman Sachs Group, October 29, 2026), combined with public market information. The ratings, target prices, earnings forecasts, and related judgments cited herein are solely those of the broker's analysts, reflecting only their affiliated institution's stance, representing no position of TechFlow Research, and do not constitute any investment advice.

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