Hey everyone,
I just recently finished working through Amazon’s finances out to 2030 with my research firm Northwise. The question that kept coming up was how much cash would be left for shareholders after paying for the growth and capex.
Over the twelve months through June, Amazon generated $161.4 billion of operating cash flow and spent $169 billion on property and equipment after sales and incentives. Free cash flow was negative $7.6 billion, even as AWS grew almost 37% in the latest quarter.
I expect the spending to keep increasing. Our estimates include approximately $1.6 trillion of cash capital expenditure between 2026 and 2030, reaching $401 billion annually by the final year. We also see a path to $334 billion of operating income and $89 billion of free cash flow that year.
The question we are attempting to answer is whether or not Amazon can be great value, despite this funding cycle/negative FCF and massive bet on accelerating AI growth.
That requires a lot to go right, particularly at AWS. Below are the numbers, what we’re assuming, and how the cash and debt change when those assumptions fall short.
**Where we expect the revenue to come from**
|Revenue|2026E|2028E|2030E|
|:-|:-|:-|:-|
|Online stores|297.0|364.3|438.8|
|Physical stores|23.5|25.9|28.3|
|Third-party seller services|190.0|246.9|312.5|
|Advertising|84.5|128.9|185.6|
|Subscriptions|55.5|70.2|85.8|
|Other, excluding Leo and Zoox|7.4|11.0|15.5|
|Leo satellite services|0.1|3.8|13.7|
|Zoox autonomous taxis|<0.1|0.9|6.4|
|AWS|178.8|340.9|556.4|
|**Total**|**836.8**|**1,192.8**|**1,643.0**|
Advertising is separated from commerce here. Amazon includes it within its reported North America and International segments. Seller services represent Amazon’s fees rather than the full value of merchandise sold.
AWS reaches $556 billion in 2030, compared with $129 billion in 2025. That requires roughly 34% annual growth over five years.
We split AWS into core cloud and direct AI services. Core cloud reaches $312 billion, with annual growth slowing from 25% in 2027 to 16% in 2030. Direct AI reaches $244 billion, with growth slowing from 115% to 40%. Amazon does not disclose this exact split.
Our reasoning is that businesses deploying AI still need databases, storage, security and conventional computing. An application handling a customer’s order has to retrieve the account, check inventory, process the change and record the transaction. AWS can earn from all of that surrounding activity.
The demand evidence is substantial. Amazon disclosed $496 billion of remaining customer commitments at June 30, primarily related to AWS, with a weighted-average remaining contract life of 6.4 years. The equipment still has to arrive, customers have to use it, and Amazon has to deliver the contracted services.
**What the cloud expansion costs**
We have AWS cash capital expenditure rising from $174 billion in 2026 to $322 billion in 2030.
For new AWS investment, we allocate 60% to equipment, 30% to buildings, and 5% each to power/cooling and land. Equipment is depreciated over 5.5 years, buildings over 30 years and power systems over 15.
Across Amazon, annual property depreciation rises from roughly $59 billion to $189 billion. We expect AWS operating margin to fall from 37.6% in 2026 to 34.2% in 2028 before recovering to 36.8% in 2030.
The 5.5-year equipment life is an assumption worth questioning. Older chips can remain useful internally for quite some time, but the price customers will pay for that computing, its electricity consumption and maintenance costs determine whether keeping it running externally makes economic sense.
This also makes us reluctant to add back most of the spending as “growth capex” when calculating owner earnings. Buildings may support several generations of equipment. The equipment itself needs replacing much sooner. Shareholders have to pay for both.
**Advertising contributes much more profit than its revenue share suggests**
We expect advertising to reach $185.6 billion of revenue and $81 billion of operating income in 2030.
That implies roughly a 44% operating margin. Amazon does not disclose advertising profit separately, so this depends on how we allocate content, distribution and shared expenses. Giving advertising the revenue while leaving all the associated costs in retail would make it look much better than it is.
The attraction is straightforward: Amazon reaches people while they are deciding what to buy. Video and external distribution add more opportunities, although acquiring those audiences can cost more than placing an advertisement in shopping results.
Our commerce assumptions are more moderate. Online-store growth slows from 11% in 2027 to 9.5% in 2030, while seller-services growth slows from 14% to 12%. More frequent grocery orders can improve delivery density, provided the extra picking and delivery costs don’t consume the benefit.
By 2030, we expect commerce operating income, excluding advertising and the newer businesses, to reach $38.9 billion in North America and $7.5 billion internationally. Subscriptions reach $85.8 billion of revenue.
AWS and advertising together provide about 85% of total operating income. Most of our attention goes to those two businesses because that is where an error would do the most damage.
**Earnings grow well before cash accumulates**
|Our estimates|2026E|2027E|2028E|2029E|2030E|
|:-|:-|:-|:-|:-|:-|
|Normalized operating income|111.6|142.1|194.7|265.4|334.1|
|Normalized net income|86.4|107.5|146.7|201.6|256.9|
|Normalized diluted EPS|$7.92|$9.75|$13.17|$17.95|$22.68|
|Operating cash flow|179.7|236.1|309.9|394.1|490.3|
|Net cash capital expenditure|220.0|283.8|329.6|366.4|401.3|
|**Free cash flow**|**(40.3)**|**(47.7)**|**(19.7)**|**27.7**|**89.1**|
|Ending cash and marketable securities|109.7|80.0|95.4|112.7|160.5|
|Ending financial borrowings|157.5|192.4|238.5|231.9|194.9|
We remove investment revaluations and specified unusual items from normalized earnings. Stock compensation remains an expense. Free cash flow is operating cash flow less net cash capital expenditure, before investment purchases, acquisitions and financing flows.
In 2027, we get $107.5 billion of net income alongside negative $47.7 billion of free cash flow. Funding private investments adds further cash requirements.
Borrowings peak around $238.5 billion in 2028 before declining to $194.9 billion in 2030. Finance leases and financing obligations add another $45.1 billion at the end of 2030.
We retain an annual liquidity target of at least $65 billion or 8% of revenue, whichever is greater. We also use a 22% normalized tax rate and collection periods of 52 days for AWS and 65 days for advertising. Unpaid capital equipment is tracked separately from ordinary supplier balances. Paying a supplier later helps current cash flow but leaves a future bill.
Stock compensation reaches $31 billion annually by 2030. Average diluted shares rise from 10.916 billion in 2026 to 11.326 billion, with no assumed buybacks to offset the increase.
**Leo and Zoox contribute relatively little by 2030**
We estimate $13.7 billion of revenue and $1.5 billion of operating income for Leo, Amazon’s satellite business, in 2030. It is still spending $10 billion on capital that year. Revenue includes broadband, enterprise and government services, direct-to-device connectivity, hardware and other services. The $3 billion assigned to direct-to-device service is one of the less certain assumptions.
For Zoox, we get $6.4 billion of revenue and $0.7 billion of operating income. That uses an average of 33,000 commercially active vehicles, completing 26 paid rides daily at $20.50 per ride. The year-end fleet is larger, at 50,300, but vehicles arriving late in the year cannot earn twelve months of fares.
Together, the two businesses contribute less than 1% of our estimated 2030 operating income after several years of losses. Their longer-term potential matters, but neither makes up for a large AWS shortfall.
**How much do the results change in scenario sensitivities?**
|Change to our assumptions|2030 AWS revenue|2030 free cash flow|2030 financial borrowings|
|:-|:-|:-|:-|
|Starting estimates|556.4|89.1|194.9|
|AWS equipment purchases 20% lower by quantity|517.8|133.3|80.0|
|AWS equipment purchases 20% higher by quantity|612.1|57.9|310.9|
|AWS input costs persistently 10% higher|556.4|43.9|340.2|
|AWS operating margin 3 percentage points lower|556.4|73.9|230.8|
Buying less equipment improves near-term cash flow but reduces revenue. Buying more supports additional revenue while requiring more borrowing.
Higher input costs are particularly painful. With revenue unchanged, a persistent 10% increase cuts free cash flow roughly in half and adds about $145 billion to borrowings. Amazon needs either pricing power or sufficient productivity improvements to absorb equipment inflation.
We also ran 50,000 combinations of demand, deployment, costs and other operating assumptions, then grouped the outcomes:
|2030 averages|Bear|Base|Bull|
|:-|:-|:-|:-|
|Revenue|1,430.1|1,652.5|1,802.4|
|Operating income|214.7|332.1|416.1|
|Normalized EPS|$14.28|$22.47|$28.23|
|Net cash capital expenditure|319.1|416.1|503.3|
|Free cash flow|58.0|75.2|71.1|
|Financial borrowings|246.5|218.0|223.5|
Bull produces less free cash flow than Base in 2030 because spending reaches $503 billion. Some of Bear’s cash improvement comes from investing less. A higher free-cash-flow number can therefore mean either better economics or fewer worthwhile opportunities to expand.
We’re positive on Amazon because the existing businesses give it several ways to earn through this spending cycle. But AWS reaching $556 billion of revenue at approximately a 37% operating margin is a large assumption, and shareholders are funding the attempt well before receiving the cash.
