Amazon posted second-quarter revenue and cloud growth that came in ahead of estimates. Shares jumped more than 10% in after-hours trading.
Revenue came in at $200.61 billion, above the $196.47 billion forecast.
CEO Andy Jassy called AWS "booming," noting that its AI and internally designed chip operations each surpassed a $25 billion annual revenue pace.
During a conference call with investors, Jassy said the company is planning $220 billion in capital expenditures for 2026, with the added investment aimed at meeting AI demand. The original target, set in February, was $200 billion, and Amazon repeated that number in April. He attributed the upward revision to rising memory costs. 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."
The revised figure fits the trajectory Amazon has laid out in recent reports.
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Analysts had expected Amazon to raise its capex outlook after Alphabet lifted its spending ceiling to $205 billion. Last week, Alphabet said Google Cloud revenue expanded 82%. Microsoft, meanwhile, posted a 43% gain in Azure revenue for its fiscal fourth quarter.
Quarterly capital expenditures totaled $54.2 billion, up from $32.1 billion in the same period last year. That heavy spending pushed Amazon's free cash flow into negative territory. Over the trailing twelve months, free cash flow came to an outflow of $7.6 billion, versus an inflow of $18.2 billion a year earlier.
Jassy told investors on the call that the outlays are required to meet accelerating demand for AWS. He said the cloud unit's backlog - contracted work not yet live - hit $496 billion in the quarter.
Amazon has made its in-house chip lineup - Trainium and Graviton - a more visible part of its growth story. Its enterprise-facing AI offerings, including the Bedrock model marketplace, are aimed mainly at businesses. The company is balancing huge AI product and infrastructure spending with pressure from nervous investors who want clearer evidence of returns.
For the current quarter, Amazon forecast revenue of $197 billion to $202 billion. LSEG analysts had projected $204.1 billion. Amazon attributed the softer outlook to difficult year-over-year comparisons because Prime Day moved from its usual July slot to June this year. Excluding Prime Day from both periods, Amazon said third-quarter 2026 growth "would be nearly 400 basis points higher."
In North America, second-quarter sales climbed to $116.2 billion, up 16% from a year earlier, helped by Prime Day. Online retail sales across the U.S. rose 9% to $26.4 billion for the weeklong shopping event, according to Adobe. Amazon doesn't disclose Prime Day revenue.
Amazon projects third-quarter operating income from $22.5 billion to $26.5 billion; StreetAccount analysts had forecast $24.92 billion.
Second-quarter net income reached $62.6 billion, or $5.75 a share, versus $18.2 billion, or $1.68 a share, in the prior-year period. Amazon said the result included $53.4 billion in pre-tax income, mostly tied to its stake in AI lab Anthropic.
The capex increase is part of a broader industry trade-off: spend heavily on AI infrastructure now to capture future demand. Amazon's $496 billion backlog and AWS growth help explain the strategy, but the swing to negative free cash flow shows the near-term cost.
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