Cloud growth and capital spending
Amazon raised its planned 2026 capital expenditure to $220 billion, a 10% increase, after its Amazon Web Services unit posted its strongest quarterly growth in more than four years. AWS revenue accelerated 36.7% year over year in the second quarter—the fastest pace in 18 quarters—lifting the segment to a $169 billion annualized revenue run rate, according to a company post by CEO Andy Jassy. The stepped-up spending pushed Amazon's free cash flow sharply negative, with the company burning $7.6 billion on a trailing 12-month basis, compared with $18.2 billion in positive free cash flow a year earlier. Despite the cash drain, Jassy told investors the company is "only pouring money into serving demand that already exists."
Capacity reservations and AI momentum
Jassy said a majority of available AWS capacity for 2027 and some capacity for 2028 had already been reserved by customers. Amazon's AI revenue run rate climbed to more than $25 billion, growing at triple-digit percentages year over year, while the company's chips business reached an annual revenue run rate above $25 billion with similar growth. On the earnings call, Jassy said growth in AI services is feeding demand for AWS's core CPU- and storage-based offerings, citing the company's Graviton processor as offering 30%–40% better price-performance than competing CPUs. He also pointed to Bedrock AgentCore as managed infrastructure for production-grade agents, with recently added features for policy controls, autonomous payments, and web search.
Market reaction and analyst views
Amazon shares surged nearly 14% in the trading session following the results, putting the stock on track to add more than $340 billion in market value if gains held, with at least 15 brokerages raising their price targets. The reaction stood in contrast to Meta and Alphabet, which both slumped about 7% despite reporting strong revenue growth after raising their own capital spending forecasts while free cash flows cratered. Analysts framed the results as evidence that Amazon's AI investments are already producing visible returns. Bill Birmingham, managing director at REX Financial, said the market is no longer questioning whether AI demand is real, with the new dividing line being "whether unprecedented spending is producing visible, near-term revenue and margin expansion." Thomas Monteiro, senior analyst at Investing.com, said Amazon is "earning the right to keep spending," while Chris Ballard, managing partner at Check Capital, called the approach "methodical and responsible."
Other business segments
Amazon's advertising unit generated $19.8 billion in revenue in the second quarter, up 26% year over year, powered by AI tools, conversational shopping, and multi-sport streaming. The company also reported strong growth across its stores business, including grocery and pharmacy, with Jassy citing record delivery speeds and expanding selection on the earnings call. The after-hours stock move of more than 9% reported on July 30 preceded the roughly 14% session gain the following day, as the share reaction broadened from initial results-driven trading into a full-session rally.
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