Amazon’s chip savings versus Alphabet’s $9.06 billion cash burn

By Priya Raman

What did the third-quarter results show?

Alphabet posted negative $9.06 billion in third-quarter free cash flow (cash left after operating and capital spending) as Google Cloud revenue rose 103%.

Amazon and Alphabet reported third-quarter results one day apart in late October 2026. Both quarters relied on internally designed chips, and both companies now need more power to sustain growth.

Amazon Web Services (AWS) revenue reached $45.98 billion, up 39%, with a 38.7% operating margin (operating profit as a share of revenue).

Management linked part of that margin to custom silicon (company-designed chips) savings from Trainium and Graviton, and said customers using Amazon chips saved more than $2 billion in Q3.

AWS used Trainium and Graviton to post its fastest growth in nearly five years. Trainium revenue commitments rose more than 20-fold.

Most of Bedrock (Amazon’s model-development service) already runs on Trainium, so Amazon retains the savings as AWS profit.

Google Cloud revenue reached $30.71 billion, up 103%, while operating income rose to $11.12 billion from $3.59 billion. The increase coincided with strong demand for TPU systems (Google-designed chips), which became a product Google sells directly.

CEO Sundar Pichai said: “strong demand for our TPU systems across a wide range of customers.”

How do the chip economics differ?

The two groups place custom-chip revenue and savings in different parts of their businesses:

• Amazon: Trainium and Graviton earn revenue mostly inside AWS and Bedrock. External chip sales are slated for late 2027.
• Alphabet: TPU systems earn revenue as Google Cloud products. External sales are already underway.
• Capital expenditure: Amazon spent $77.26 billion in Q3, against $51.36 billion for Alphabet.

Amazon keeps the savings from Trainium within its own cloud margins. Google records TPU demand as product revenue while financing the supporting infrastructure through debt and equity.

Who controls access to power?

Amazon said large customers reserve hundreds of megawatts or up to a gigawatt of capacity in advance. The company gave no utility-connection timeline or megawatt allocation, leaving the delivery schedule unresolved.

CEO Andy Jassy said neocloud capacity (computing capacity obtained from specialist providers) runs about 3,500 basis points (35 percentage points) worse in operating margin than long-leased data centers.

Owning or long-leasing sites can give Amazon more control over power connections. Amazon listed energy prices as a risk and committed $1 billion to U.S. data-center communities.

Alphabet’s cash flow shows the financing pressure. The company raised $28.7 billion in notes (debt securities) alongside equity sold through its at-the-market (ATM) program.

It also uses demand-response arrangements (scheduled load reductions) that allow utilities to cut data-center load during peak periods. That flexibility helps, but debt and share dilution still finance the power-hungry buildout. Each new facility requires electricity and cooling.

What must the strategies prove next?

Amazon plans roughly $220 billion in 2026 capital expenditure. The test is whether that spending keeps reducing payback periods (time required to recover the investment), as management promised.

Alphabet must show that TPU sales can cover rising interest costs. GAAP EPS (earnings per share under generally accepted accounting principles) was $2.12, missing the $2.97 estimate. An equity securities loss accounted for $0.55 of that shortfall.

Amazon shares rose 7.88% over the past week; Alphabet shares fell 18.75% over the past month. Those windows are not comparable, so the price moves do not establish relative performance.

The evidence currently favors Amazon’s chip strategy because Trainium savings remain inside AWS margins, while owned and leased sites provide more control over power. Google grows faster, but debt and dilution finance that expansion. That advantage would narrow if Alphabet’s free cash flow turned positive while Google Cloud kept doubling.