Key facts
- Amazon reported a 20% increase in net sales and 37% growth in AWS revenue for its second quarter.
- The company's stock surged nearly 10% in after-hours trading following the earnings announcement.
- Amazon's capital expenditures for property and equipment reached $173 billion for the fiscal year ended June 30.
- Amazon raised its 2026 capital expenditure forecast to $220 billion.
- The company reported negative free cash flow for the first time this year.
Amazon's second-quarter earnings report revealed a significant surge in its stock price, climbing nearly 10% in after-hours trading, fueled by a 20% rise in net sales and particularly strong performance from its cloud division, AWS.
AWS revenue grew by 37% year over year, reaching $42 billion for the quarter. This growth is occurring alongside substantial investments in infrastructure, with Amazon spending $173 billion on property and equipment in the fiscal year ended June 30, an increase from $107.65 billion the previous year. The company also raised its 2026 capital expenditure forecast to $220 billion, even as it dipped into cash reserves, resulting in negative free cash flow for the first time this year.
Despite the ballooning expenses, investors have reacted positively, viewing the cloud revenue as a justification for the spending. This trend is mirrored by Microsoft and Google, whose shares also rose on strong cloud results. In contrast, Meta experienced an 8% stock decline due to investor skepticism over its high capital expenditures and unclear revenue sources for its AI initiatives.
The broader lesson for the AI economy, according to the report, is that investors currently favor cloud hosts like Amazon, Microsoft, and Google, seeing them as the most reliable part of the AI infrastructure stack. However, the sustainability of this model hinges on the demand for AI services, as cloud hosting revenue ultimately depends on the spending of AI labs and startups, such as Anthropic.