Amazon reported surging cloud growth during the second quarter, pointing to strong artificial intelligence demand, and the company boosted its capital spending forecast for the year.
The stock shot up more than 10% in extended trading.
Here's how the company did, compared with estimates from analysts polled by LSEG:
- Earnings per share: $5.75 a share. That may not compare with the $1.82 per share expected by LSEG
- Revenue: $200.61 billion vs. $196.47 billion estimated
Wall Street was also looking at other key revenue numbers:
- Amazon Web Services: $42.2 billion vs. $40.54 billion expected, according to StreetAccount
- Advertising: $19.81 billion vs. $19.43 billion expected, according to StreetAccount
Amazon said it expects to spend even more on AI, with capital expenditures projected to hit $220 billion this year, CEO Andy Jassy said on a conference call with investors. In February, the company said capex would hit $200 billion this year, and it held steady on that forecast in April.
Jassy said rising memory prices pushed its capex estimate higher. He suggested Amazon's spending spree isn't likely to abate anytime soon.
"But even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too," Jassy said. "In fact, the demand we already have for 2028 is striking."
Wall Street had anticipated Amazon would boost its capex forecast after Alphabet hiked its spending plans to as high as $205 billion.
Revenue in Amazon's cloud segment expanded 37% year over year during the quarter, surpassing Wall Street's expectations for 31% growth. That marked the unit's fastest growth since 2021, Jassy said in the earnings release.
Heading into the earnings report, investors were keenly focused on AWS growth after Amazon's primary cloud rivals posted robust cloud results. Alphabet last week reported Google Cloud growth of 82%, while Microsoft's Azure cloud revenue rose 43% during the fiscal fourth quarter.
Jassy said AWS is "booming," and pointed to the growth of its artificial intelligence and homegrown chips units, which both exceeded a $25 billion annual revenue run rate. Amazon has increasingly looked to highlight its in-house chips division, which includes the Trainium and Graviton brands, as a newer growth pillar for the company. Its AI products like the Bedrock model marketplace have primarily been targeted for enterprises.
Amazon has been juggling the need to spend massive sums on AI products and infrastructure, while also appeasing jittery investors eager to see returns on those investments. Capital expenditures during the quarter reached $54.2 billion during the June quarter, compared with $32.1 billion a year ago.
The lavish spending has caused Amazon's free cash flow to flip into the red. The company's free cash flow for the trailing twelve months amounted to an outflow of $7.6 billion, while it recorded an inflow of $18.2 billion one year earlier.
On a conference call with investors, Jassy highlighted that those investments are necessary to fulfill the surging demand for its cloud services. AWS backlog, or contracted work that hasn't come online yet, reached $496 billion during the quarter, he said.
For the current quarter, Amazon guided for revenue between $197 billion and $202 billion. Analysts polled by LSEG were expecting $204.1 billion.
The company blamed tough comparisons to last year's third quarter as a result of its decision to shift this year's Prime Day discount event up to June, instead of its typical July timeframe. Excluding the impact of this year and last year's Prime Day, third-quarter 2026 growth "would be nearly 400 basis points higher," Amazon said.
Amazon doesn't disclose Prime Day revenue, but U.S. sales across online retailers grew 9% to $26.4 billion during the weeklong event, according to Adobe. Prime Day helped lift Amazon's North America revenue 16% year over year to $116.2 billion during the second quarter.
Operating income in the third quarter is expected to be in the range of $22.5 billion to $26.5 billion, while analysts polled by StreetAccount forecast $24.92 billion.
Net income for the second quarter was $62.6 billion, or $5.75 per share, compared with $18.2 billion, or $1.68 per share, a year earlier. The company said this includes pre-tax income of $53.4 billion, primarily from its investments in AI lab Anthropic.
Amazon said it more than doubled the number of new customers for its online pharmacy service, and grew same-day prescription deliveries "nearly 5x." The company has operated Amazon Pharmacy since 2020, and the service remains a key pillar of its health-care push, but it has shared scant details about user sign-ups.
Facts Only
* Earnings per share were $5.75, compared to an expected $1.82 by LSEG.
* Revenue was $200.61 billion versus an estimated $196.47 billion.
* Amazon Web Services revenue was $42.2 billion versus an expected $40.54 billion.
* Advertising revenue was $19.81 billion versus an expected $19.43 billion.
* Capital expenditures were $54.2 billion during the June quarter, compared to $32.1 billion a year ago.
* Cloud segment revenue expanded 37% year over year in the quarter, exceeding Wall Street's 31% growth expectation.
* AWS backlog reached $496 billion during the quarter.
* Net income for the second quarter was $62.6 billion, or $5.75 per share.
* The company spent $53.4 billion primarily on investments in the AI lab Anthropic.
* New customers for the online pharmacy service more than doubled.
Executive Summary
Full Take
The narrative presented is one of aggressive, high-stakes investment driven by perceived inevitable future demand in artificial intelligence infrastructure and cloud services. The pattern suggests a dynamic where massive capital deployment—even resulting in negative free cash flow—is framed as a necessary prerequisite for capturing dominant market positioning. The contrast between the substantial spending ($220 billion forecast) and the resulting financial strain (flipping free cash flow to a deficit) establishes an inherent tension: achieving market leadership versus managing immediate financial solvency. Furthermore, the shift in growth drivers from traditional retail metrics to cloud services and proprietary AI hardware signals a strategic pivot where internal innovation is being leveraged not just for revenue but as a mechanism to secure future pricing power and moat against competitors like Alphabet and Microsoft. The persistence of the investment drive, despite recent cautionary statements regarding 2026 and 2027 capacity, implies a belief that the competitive advantage in AI necessitates this spending irrespective of near-term fiscal pressures. The implied implication is that market capture in emerging technology environments often requires accepting short-term financial friction to secure long-term systemic control.
When was the market primed for Amazon's growth narrative to be accepted as an unassailable necessity? What factors must remain stable for the projected demand dynamics to continue overriding fiscal concerns? Does this pattern of capital intensity risk setting a precedent where future investment justifications are driven more by momentum than by achievable, verifiable returns on those massive expenditures?
Sentinel — Human
The text reads like standard, albeit detailed, financial reporting that synthesizes multiple data points and direct statements from a corporate source and external analysts.