AWS and Microsoft Cloud Growth Lift Amazon and Microsoft Shares
Amazon Web Services grew revenue 39% in the third quarter of 2026, to $45.98 billion, and lifted operating income 55%, to $17.77 billion, according to CNBC's report on the results. AWS is Amazon's cloud unit, which rents computing power and storage to other companies over the internet. Operating income is profit from the core business, before investment gains and taxes.
The rest of Amazon grew much more slowly. Consolidated net sales, meaning total revenue across all its businesses, reached $201.9 billion in the quarter, up 12% from $180.2 billion a year earlier, per Amazon's earnings release. That is a sharp slowdown from the 20% year-over-year increase in net sales Amazon reported for the second quarter. AWS moved the other way, accelerating from the 37% growth it posted in the second quarter. The cloud unit now accounts for most of the growth story at Amazon.
Second-quarter operating income was $27.5 billion, up 43%. Second-quarter net income, however, included $53.4 billion in non-operating pre-tax other income, primarily from investments in Anthropic, an AI company. That line sits below operating income.
For anyone comparing reported net income across quarters, the sensible step is to strip that line out. It moves with the periodic revaluations of those holdings, not with the cloud or retail businesses.
Investors reacted sharply to the second-quarter cloud numbers. Amazon shares surged nearly 14% after the report, as Reuters described the move, with the company poised to add more than $340 billion in market value. For scale, Amazon recorded a $190 billion single-day gain in February 2022. Shares then hit a record high of $285.01 on August 3, carrying the company past the $3 trillion market capitalization mark, the total market value of all its shares. They had gained over 23% year-to-date as of August, per Reuters.
Microsoft's numbers arrived earlier and moved the stock more sharply. In its fiscal fourth quarter, reported July 29, Microsoft posted revenue of $90.0 billion, up 18%, and net income of $35.8 billion. Microsoft Cloud revenue reached $59.3 billion, up 27% year-over-year, according to Microsoft's announcement. The following session, after an upbeat Azure forecast, Microsoft added nearly $450 billion in market value in a single day. Its shares closed up more than 15%, at a $3.35 trillion market capitalization, a record single-day gain per Reuters.
Microsoft's figures come from its fiscal first-quarter 2027 report. Microsoft Cloud revenue was $63.9 billion, up 30% year-over-year and 31% in constant currency, as Microsoft reported. Sequentially, the figure rose from $59.3 billion in the prior quarter.
Constant-currency growth strips out exchange-rate effects, so the one-point gap points to a small currency drag on reported growth.
Microsoft's fiscal 2026 picture was larger still. Full-year Microsoft Cloud revenue was $214.4 billion, up 27%, and Azure grew 41% and surpassed $100 billion for the first time. Those figures come from the company's annual report.
The metric that deserves the closest attention is commercial remaining performance obligation (RPO), the contracted revenue a company has booked but not yet recognized as earned by delivering the service. Microsoft's commercial RPO rose 99% to $627 billion in the third quarter of fiscal 2026, then 84% to $678 billion in the fourth quarter.
The gap between that backlog and recognized revenue is where I would look hardest. Backlog is growing at roughly three times the pace of recognized cloud revenue, the kind of gap markets price aggressively. But it is contracted, not delivered. Conversion depends on capacity, and capacity depends on the AI infrastructure spending the market has been weighing.
In my view, the two companies sit at different points on the same curve. AWS grows 39% from a base of $45.98 billion, while Microsoft Cloud grows 30% from $63.9 billion, so the percentage gap understates how much larger Microsoft's cloud franchise is in dollar terms. Amazon's stock reaction in July rested on the reassurance that cloud growth could justify AI spending. Microsoft's July reaction rested on a forecast. Neither move reflects realized earnings from the AI build-out alone.
For readers tracking these names, the numbers to watch are how much backlog converts into quarterly cloud revenue, the operating margin trajectory at AWS as growth continues, and whether non-operating gains keep inflating headline net income. Market capitalizations above $3 trillion already reflect a great deal of expected growth. The next reported quarters will show how much of that expectation turns into recognized revenue.
