Amazon’s stock pops on roaring cloud growth and soaring AI demand

Amazon.com Inc. reported second-quarter earnings of $5.75 per share, crushing the $1.82 forecast, on revenue of $200.61 billion, up 20% year-over-year, driven by surging cloud growth and AI demand. Amazon Web Services revenue hit $42.2 billion, up 37%, its fastest growth since 2021, as CEO Andy Jassy said AI services and homegrown chips reached a $25 billion annual run rate. Amazon boosted its 2026 capital expenditure forecast to $220 billion to meet AI infrastructure demand, and its stock rose over 9% in late trading.

Amazon’s stock pops on roaring cloud growth and soaring AI demand Amazon.com Inc. https://www.amazon.com/ delivered a solid earnings and revenue beat as it posted its second-quarter financial results, driven by surging growth in its cloud infrastructure business. Demand for artificial intelligence was the primary factor in that growth, causing the company to boost its capital expenditure forecast once again. The company reported https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/default.aspx a stunning earnings beat. It posted a profit of $5.75 per share, crushing Wall Street’s forecast of just $1.82 per share, thanks mainly to a $53 billion boost in non-operational income that stemmed from an unrealized gain on its stake in the AI lab Anthropic PBC. Revenue for the period came to $200.61 billion, up 20% from a year earlier and well ahead of the $196.47 billion forecast. All told, Amazon delivered net income of $62.6 billion, including the pre-tax income derived from its investment in Anthropic. That’s up from a net profit of just $18.2 billion one year ago. Amazon’s cloud computing business, Amazon Web Services, contributed $42.2 billion in revenue, above the Street’s $40.54 billion forecast and up 37% from the same period one year ago. That marked the unit’s fastest growth since 2021, said Amazon Chief Executive Andy Jassy. Investors were especially keen to see AWS deliver stronger growth after the company’s main rivals in the public cloud infrastructure industry delivered strong results of their own. Last week, Google LLC parent company Alphabet Inc. reported growth of 82% for Google Cloud, while Microsoft Corp.’s Azure cloud revenue jumped 43% during the company’s fourth quarter. Jassy told analysts on a conference call that AWS is “booming,” primarily due to the rapid growth of its AI services and its homegrown chips, which both reached a $25 billion annual revenue run rate. AWS has been heavily promoting its Trainium and Graviton chips as alternatives to Nvidia Corp.’s graphics processing units, and they have become a massive growth driver for the cloud business. Meanwhile, AI platforms like Amazon Bedrock have become key to many enterprise’s AI development efforts. Rebecca Wettemann, an analyst at Valoir, told SiliconANGLE that Amazon first began investing in its homegrown chips to insulate itself from a dependence on Nvidia, and has since leveraged those investments to diversify its cloud business. “It’s part of an industry-wide hedge to make hyperscalers less dependent on other chipmakers,” she said. “As the market swings back and forth between loving and hating picks and shovels, companies that own more of their AI stick should be better positioned regardless of which way the market winds are blowing on a particular day.” The market liked what it saw, and Amazon’s stock gained more than 9% in late trading. With those gains, it has now recovered from all of its losses and is up 2% in the year to date. Investors were even prepared to forgive Amazon’s decision to increase its capital expenditures forecast. The company said it’s planning to spend even more on AI infrastructure than it first envisaged, and bumped up its capex forecast to $220 billion this year. Back in February, Jassy had told investors that the company’s capex would likely total $200 billion, before holding steady on that forecast in April. However, with the rising cost of things like memory chips, which are vital components of AI servers, the company has had no choice but to increase its budget. Jassy said the company’s spending spree isn’t going to dry up anytime soon. “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,” he said. “In fact, the demand we already have for 2028 is striking. Amazon had been expected to boost its capex spending after Alphabet did the same last week. However, the company has had to juggle its massive investments on AI infrastructure and services with the need to appease investors who’re worried about when the company will see a return on those investments. During the second quarter, its capex bill hit $54.2 billion, up from $32.1 billion in the same period one year before. With such lavish spending, Amazon’s free cash flow has now ended up in the red. Its 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. Addressing questions from analysts, Jassy said the ongoing investments are needed so that the company can meet the surging demand for its cloud services. He said that AWS had a backlog of contracted work that has not yet been performed of $496 billion at the end of the quarter. “Amazon’s growth numbers should make investors happy, as should the progress it’s seeing with Amazon Bedrock,” Wettemann said. “Investors are increasingly impatient about AI bets eating cash flow. Hyperscalers that don’t show the ROI from their capex investments in terms of real AI growth are suffering.” Looking to the current quarter, Amazon is guiding for revenue of between $197 billion and $202 billion, trailing the Street’s forecast of $204.1 billion. While that was surprising, the company said there’s a good reason for this – namely its decision to switch this year’s Prime Day shopping event to June instead of its usual July slot. If the impact of this year’s Prime Day and last year’s event are taken out of the equation, Amazon’s estimated third-quarter growth would be around 400 basis points higher, officials said. While Amazon doesn’t disclose its Prime Day revenue, sales across online retailers in the U.S. grew 9% to $26.4 billion throughout the weeklong event. Emarketer analyst Sky Canaves said Prime Day’s move to June not only creates a tougher comparison for Amazon’s third-quarter forecasts, but also gave it a much larger topline in the second quarter. “It saw a substantial bump in ad revenues from the shift,” he said. “But U.S. consumers remain cautious, with shoppers making more purchases but spending less on each item. Amazon’s sales of groceries and other essentials are growing meaningfully faster than the rest of its eCommerce business.” Amazon also forecast operating income for the third quarter of $22.5 billion to $26.5 billion, with the midpoint of that range falling just shy of the Street’s $24.92 billion forecast. 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