Goldman Sachs Research Note Breakdown: AWS Growth Nears 40%, but Amazon Still Must Clear Higher Expectations

Written by: Rita

Before earnings, the buy side raised the growth bar for AWS to above 42%. Amazon ultimately delivered 39.3%. In its Amazon earnings flash review on October 29, 2026, Goldman Sachs listed this gap as an important observation. Strong cloud growth could still disappoint investors with higher expectations.

Goldman Sachs expects the market's initial reaction to this earnings report to be negative. The report focuses on the alignment among cloud growth, compute capacity coming online, and capex. Amazon needs to convert sustained investment into sufficiently fast revenue growth while maintaining overall profitability.

AWS Faces a Higher Growth Bar

Amazon Web Services (AWS) third-quarter revenue was $45.98 billion. Goldman Sachs noted that the result exceeded its own and sell-side consensus forecasts but was below the above-42% growth level repeatedly discussed by the buy side before earnings. The difference between the two sets of expectations is an important clue for understanding the short-term reaction.

The report also noted that the company's forward commentary referenced roughly 40% AWS growth in 2027 and 2028. Goldman Sachs therefore continues to focus on the medium-term expansion capacity of the cloud business. Market discussion has advanced from whether demand exists to how quickly new compute capacity can serve that demand.

This is also why Goldman Sachs listed compute supply as a key earnings-call focus. Customer demand requires available compute capacity to absorb it, while new capacity coming online affects the pace of revenue recognition. Demand visibility, construction progress, and revenue release need to align on the same growth path.

Goldman Sachs is also watching the positioning of Bedrock and Trainium. The former is Amazon's generative AI service platform, and the latter is its self-developed AI training chip. The report links these two initiatives to changes in industry demand, tracking how Amazon uses services and infrastructure to capture AI spending.

Profit Beat Underpins Operations

In the third quarter, Amazon's total revenue was $201.94 billion, up 12.1% year over year. Goldman Sachs forecast $201.51 billion, and market consensus was $202.35 billion. Sales scale was close to prior expectations, while the company's operational highlights were more evident on the profit side.

On a U.S. GAAP basis, operating income was $28.1 billion, above market expectations of $26.16 billion and also above the upper end of the company's previous guidance. Overall operating margin was 13.9%. Revenue growth remained stable, and the company delivered a stronger profitability result.

By segment, AWS operating income was $17.77 billion, with a 38.7% margin. North America segment operating income was $8.72 billion, with a 7.7% margin; International segment operating income was $1.58 billion, with a 3.7% margin. The importance of cloud to overall profit is very clear in this set of data.

Goldman Sachs's focus on Amazon therefore always includes the business mix. Cloud, advertising, third-party seller services, and subscriptions are listed in the report as expansion directions for high-margin businesses. Their growth rates will affect the group's ability to convert sales growth into profit.

Retail Growth Still Requires Careful Execution

Online store revenue in the third quarter was $68.47 billion, up 1.6% year over year. Third-party seller services revenue was $46.49 billion, up 9.4% year over year. The two revenue growth rates show a clear difference, and platform services and merchandise retail also have different roles within the group.

Subscription services revenue was $14.01 billion, up 11.4% year over year; advertising services revenue was $19.64 billion, up 10.9% year over year. These businesses are linked to consumers, sellers, and platform traffic, affecting both the revenue mix and the stability of group earnings.

Goldman Sachs listed consumer health as an earnings-call focus. For Amazon, consumer demand affects merchandise sales, seller operations, and advertising. Looking at these businesses together makes it easier to understand how retail-side demand transmits into platform services.

The report also focuses on changes as AI agents participate in shopping. Goldman Sachs wants to know how AI agents have already affected commercial activity, and how horizontal and vertical agent behavior will evolve. This topic extends the retail discussion from near-term consumption to how consumers find and buy products.

Capex Tests Growth Delivery

Amazon reiterated that 2026 capex would be about $220 billion. Goldman Sachs listed future capital needs, spending arrangements, and financing for compute expansion as important tracking items. Continued build-out provides conditions for growth but also places demands on cash investment and operating returns.

Total revenue guidance for Q4 is $240 billion to $247 billion, including a 0.6 percentage point negative impact from foreign exchange. The market consensus is $244.4 billion, which falls within the range. The company's revenue range broadly covers the market's prior expectations.

Operating income guidance is $28.5 billion to $33.5 billion, with a market consensus of $32.9 billion. Goldman Sachs noted that the upper end of the range is slightly above consensus, but the implied operating margin at the midpoint is 12.7%, below the market's expected 13.5%. The flexibility embedded in the profit guidance should be understood alongside continued investment.

Goldman Sachs maintained a Buy rating and a 12-month price target of $375, while flagging competition, slower-than-expected expansion of high-margin businesses, and investment in new businesses pressuring margins as risks. The company needs to maintain the competitiveness of its cloud business while also keeping advertising, subscriptions and merchant services growing. Group profits depend on the combined contribution of multiple operating outcomes.

The divergence in this earnings report centers on strong growth versus high expectations. Compute capacity buildout determines how fast AWS can scale, while retail and advertising determine how much profit can be retained. Amazon's next focus is to tie together compute capacity buildout, business growth and profitability returns, delivering results on both fronts.

Disclaimer

This article is a compilation and interpretation by 潮向研究 of a third-party brokerage research report (Goldman Sachs Group, October 29, 2026), incorporating information compiled from public market sources. The ratings, price targets, earnings forecasts and related judgments cited in this article are the views of the brokerage's analysts, represent only the positions of their affiliated institutions, do not represent the views of 潮向研究, and do not constitute investment advice.

Markets carry risks, and decisions should be made independently. This article should not be used as the basis for buying or selling any securities.

Source: 深潮 TechFlow