Nested stacks in CloudFormation or SAM has tree-like structure. Usually, there is a root stack, which contains multiple other stacks, aka nested stacks.

Nested stacks can have other nested stacks, creating hierarchy of stacks. Stack update operation happens at the root level, so if you need to have seperate deployable stacks, consider using SSM parameters. Using SSM parameters, you can deploy different stacks without intitating root-level stack update, and sharing of data between happens using SSM parameters. For example, Stack A deploys kms and s3 resources and saves the id or arn of kms or s3 bucket to SSM parameters. Stack B deploy DynamoDB and Lambda functions. Stack B reads from SSM parameters that was saved by Stack A, and uses the ids or Arns to maybe use encryption key.

For SAM users, make sure to add "Transform: AWS::Serverless-2016-10-31" to root.yml. In terms of resources type in root.yml, "AWS::Serverless::Application" macro is optional for SAM since it would understand "AWS::Cloudformation::Stack" type as well. We have added # comments to make it easy for you copy and understand the subtles changes for SAM

Let's dive into the code showing how to use SAM or CloudFormation nested stacks and share parameters or variables with child Stacks

# root/parent stack
AWSTemplateFormatVersion: "2010-09-09"
# Transform: AWS::Serverless-2016-10-31
Description: >
  Nested Stacks Parent templates

Parameters:
  StageName:
    Type: String
    Default: dev
    AllowedValues:
      - dev
      - stage
      - prod
    Description: ENV stage name

Resources:
  s3Stack:
    Type: AWS::Cloudformation::Stack # AWS::Serverless::Application
    Properties:
      # assuming there are two outputs in s3Stack (AppBucket, AppBucketDomain)
      Location: s3stack.yml
      # passing the root/parent stack parameter value to child stack
      Parameters:
        stage: !Ref StageName

  lambdaStack:
    Type: AWS::Cloudformation::Stack # AWS::Serverless::Application
    DependsOn: [s3Stack]
    Properties:
      Location: lambda.yml
      Parameters:
        # get the output value from s3Stack
        S3Bucket: !GetAtt keystack.Outputs.AppBucket
        stage: !Ref StageName

  apiStack:
    Type: AWS::Cloudformation::Stack # AWS::Serverless::Application
    DependsOn: [lambdaStack]
    Properties:
      Location: api.yml
      Parameters:
        TestFnArn: !GetAtt lambdaStack.Outputs.OrderFnArn
        Test2FnArn: !GetAtt lambdaStack.Outputs.Test2FnArn
        stage: !Ref StageName

  cloudfrontStack:
    Type: AWS::Cloudformation::Stack # AWS::Serverless::Application
    DependsOn: [keystack, lambdaStack, apiStack]
    Properties:
      Location: cloudfront.yml
      Parameters:
        appBucketDomain: !GetAtt keystack.Outputs.AppBucketDomain
        apiUrl: !GetAtt apiStack.Outputs.RestApiUrl
        stage: !Ref StageName

  cognitoStack:
    Type: AWS::Cloudformation::Stack # AWS::Serverless::Application
    DependsOn: [cloudfrontStack]
    Properties:
      Location: cognito.yml
      Parameters:
        redirectUrl: !GetAtt cloudfrontStack.Outputs.cloudFrontDomain
        stage: !Ref StageName

# nested/child stack
AWSTemplateFormatVersion: "2010-09-09"
# Transform: AWS::Serverless-2016-10-31
Description: >
  Nested Stacks: s3stack template

Parameters:
  StageName:
    Type: String
    Default: dev
    AllowedValues:
      - dev
      - stage
      - prod
    Description: ENV stage name

Resources:
...

# nested/child stack
AWSTemplateFormatVersion: "2010-09-09"
# Transform: AWS::Serverless-2016-10-31
Description: >
  Nested Stacks: Lambda stack template

Parameters:
  StageName:
    Type: String
    Default: dev
    AllowedValues:
      - dev
      - stage
      - prod
    Description: ENV stage name

Resources:
...