Amazon reported third-quarter revenue of $201.9 billion, up 12% year on year, and operating income of $28.1 billion, with its highest operating margin ever at 13.9%. Revenue at cloud unit AWS rose 39% to $46 billion, with operating income of $17.8 billion. Spending on property and equipment topped $77 billion in the quarter, turning trailing twelve-month free cash flow negative by $42.4 billion. The company guided fourth-quarter revenue below analysts' estimates.

What it means: The results show clearly where growth at the big technology groups now lies: infrastructure for artificial intelligence. AWS is accelerating again after two years of slower growth, because businesses are renting computing power to train and run models. The price is steep, though: Amazon is spending so much on data centres and chips that, for the first time in years, it is burning more cash than it generates. Markets reacted negatively, a sign that investors are starting to ask for evidence that these investments will pay off. For European and Greek businesses that rely on cloud services, strong demand means capacity for specialised processors stays tight and prices are unlikely to fall soon. At the same time, competition between AWS, Azure and Google Cloud, which also reported strong growth this week, gives some bargaining power to customers willing to sign multi-year commitments. IT teams planning AI projects need to treat computing costs as a significant and variable expense. Amazon's online retail and advertising businesses grew at a more modest pace.

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