Tech earnings night: AWS buy-side expectations fall, Intel’s PC and server businesses diverge

Why did buy-side expectations fall despite accelerating growth at Amazon’s cloud business?

Third-quarter AWS revenue was 46 billion dollars, up 39.3% year over year and accelerating for a sixth consecutive quarter. That exceeded Wall Street’s forecast of 37.7% but fell short of the buy-side threshold of about 43%. The quarter-over-quarter revenue increase fell from 4.6 billion dollars in the second quarter to 3.75 billion dollars.
The company provided a multiyear outlook for the first time: AWS revenue will grow more than 40% in each of 2027 and 2028. The report says this prompted sell-side analysts to raise their forecasts, but was below many buy-side investors’ previous expectations for growth in fiscal 2027 from the mid-40% range to the low-50% range.
AWS’s order backlog reached 578 billion dollars, up 82 billion dollars from the previous quarter. Management said customers booking capacity in advance gave the business good visibility into demand for 2027, 2028 and part of 2029. But third-quarter free cash flow was negative 33.5 billion dollars, while capital spending is expected to rise significantly in 2027.
AWS’s third-quarter operating margin was 38.7% and improved sequentially excluding gains on energy derivatives; however, management said AI business margins remained below those of the core cloud business, and the full impact of depreciation and amortization had yet to appear.

The midpoint of Intel’s revenue guidance for the quarter ending in December was 15.5 billion dollars, about 1.5 billion dollars below Wall Street’s forecast. The main shortfall came from the client business: the company expects its revenue to decline by more than 20% sequentially, only partly offset by growth in data center and AI.
Management attributed PC weakness to memory prices and supply, as well as customers reducing inventories to match their consumption plans for 2027. The company expects similar adjustments to continue through the first quarter of 2027 and possibly extend slightly into the second quarter.
Third-quarter data center and AI revenue was 7.32 billion dollars, up 78% year over year and above Wall Street’s forecast of 6.6 billion to 6.7 billion dollars. Fourth-quarter guidance was about 8.4 billion dollars, including an approximately 300 million dollar revenue impact from a production shutdown at an Israeli factory.
Server expansion remains constrained by wafer and packaging substrate supply, with most major improvements taking effect in the second half of 2027. Meanwhile, fourth-quarter gross margin guidance was 38%, below the market’s expectation of about 42.5%; the company’s CFO expects it is very unlikely to achieve positive free cash flow in 2027.

SNDK’s data center revenue for the quarter ending in September was 4.8 billion dollars, up 61% sequentially and above Wall Street’s forecast of 4 billion dollars. It accounted for about 88% of the company’s sequential revenue increase; the company allocated more supply to data center customers.
But edge business revenue of 5.83 billion dollars and consumer business revenue of 397 million dollars both fell short of Wall Street expectations. Management expects PC and mobile phone shipments to decline slightly in the next calendar year, a weaker outlook than the approximately flat shipments forecast in August.
The midpoint of the company’s revenue guidance for the quarter ending in December was 12.4 billion dollars, above the market forecast of 12.08 billion dollars. The gross margin guidance midpoint was 85%, roughly flat sequentially and below the 86.5% to 87.5% expected by bulls. The report links margin pressure to rising costs of components such as DRAM in enterprise SSDs.
There were no new customers for long-term supply agreements in the quarter, leaving the total at 8; as contracted products shipped, remaining performance obligations fell from the pro forma August figure of 91.1 billion dollars to 88.9 billion dollars.

TWLO’s third-quarter organic revenue grew 15.7%, above Wall Street’s forecast of 11.8% but below the buy-side threshold of about 17% to 18% and the previous quarter’s 16.7%. Organic growth in messaging was about 17%, slowing from 18% in the previous quarter.
The voice business still grew more than 20%, with growth driven roughly jointly by call volumes and software add-on services. But fourth-quarter gross profit growth guidance was about 11% to 12%, close to the organic revenue growth rate. The return of holiday hosting costs and the tailwind from email migration are reflected in the current business.
Management provided its first outlook for organic growth of at least 10% in 2027, saying this was a floor excluding the personal agent business. The report noted that buy-side investors had previously hoped growth would remain in the mid-to-high teens.