Revenue jumped 37% to US$42.2 billion at Amazon Web Services, which generates about a fifth of the company’s revenue and most of its operating profit. It was the fastest pace of growth since the fourth quarter of 2021. Analysts, on average, forecast sales of US$40.6 billion, according to data compiled by Bloomberg.
Like its Big Tech peers, Amazon is spending heavily on data centres and chips in an effort to take advantage of rising demand for AI and cloud-computing services. The company reported spending more than US$53 billion on property and equipment, including proceeds from some sales, in the period ended June 30.
Amazon raised its projection for 2026 capital expenditures to US$220 billion from a previous estimate of US$200 billion. Chief executive officer Andy Jassy said most of that spending would go towards AI.
“We’re unusually well-positioned for this AI inflection,” Jassy said during a conference call after the results were released.
Those outlays sent free cash flow negative, with Amazon reporting an outflow of US$7.6 billion for the trailing 12 months at quarter’s end.
Despite the higher capital spending and negative cash flow, “investors may be unlikely to blink, however, given the accelerating pace of AWS revenue growth and strict cost controls in other areas,” Sky Canaves, an analyst at Emarketer, said in a statement.
Jassy said Amazon’s investments would moderate over time because it’s currently building data centres from the ground up. The sites will last 30 years while the equipment inside will have to be updated every five to six years. So future investments in modernising the capacity being built this year won’t be as much, he said.
Amazon shares rose more than 9% in extended trading after closing at US$235.50 in New York. The stock has gained 2% this year.
Rival Microsoft Corp on Wednesday reported the fastest cloud growth since 2022 and indicated it would hold the line on new capital spending this year. The shares soared Thursday the most in a single day since 2008. Alphabet Inc stock declined last week after the company reported heavier spending than anticipated and negative free cash flow for the first time since it went public more than two decades ago.
In the second quarter, total revenue increased 20% to US$200.6 billion, Amazon said Thursday in a statement. Analysts, on average, projected US$197 billion.
Both Amazon’s AI and chips businesses reached new milestones of US$25 billion annual run rates, with both growing by triple-digit percentages year-over-year, the company said.
The company projected sales in the current quarter of US$197 billion to US$202 billion. Operating income will be US$22.5 (billion) to US$26.5 billion. Analysts, on average, estimated profit of US$25.1 billion on revenue of US$203.9 billion.
Amazon’s e-commerce operation still generates the biggest share of the company’s revenue and Jassy continues to push faster delivery times to online shoppers. Online sales gained 15% to US$70.4 billion in the quarter, compared with analysts’ average estimate of US$69.9 billion. Amazon held its annual Prime Day sale in June, which spurred online spending across all US retailers of US$26.4 billion, according to estimates from Adobe Inc.
The company also reported it received US$600 million in tariff refunds in the quarter. Some of that money will be returned to consumers, chief financial officer Brian Olsavsky said.
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