Amazon Lifts Capex as AWS Beats Estimates
Synopsis
The company raised its investment outlook after AWS revenue surged on accelerating demand for AI infrastructure
Key Highlights
- AWS capex 2026 increased by 10% to $220 billion.
- AWS's revenue growth reached 37%, the fastest in more than four years.
- Amazon shares rose almost 9% after hours due to solid cloud sales and AI demand.
Encouraged by strong demand for cloud services among enterprise customers, Amazon indicated that it would expand its investment in building the AI infrastructure in order to scale the two goals of cloud computing from Q2 2026 earnings.
AWS revenue grew 37%, helping reassure investors that Amazon’s heavy investment in AI spending was driving demand from customers, as businesses signed further long-term contracts for cloud infrastructure.
After increasing its Amazon $220 billion capex forecast by 10%, Chief Executive Andy Jassy said on Thursday, that they still lack enough computing capacity to meet our customers’ demand. The robust results sent the Amazon share price surging about 9% in late trading after rising 3.9% during regular hours.
AWS posts its highest growth rate in 18 quarters
Data from LSEG showed revenue at Amazon Web Services (AWS) rose 37% to $42.2 billion in the second quarter ended June 30, beating the analysts’ estimate of 31.21% growth.
Jassy said that AWS recorded its fastest revenue growth in 18 quarters, and that both Amazon’s AI and chip businesses surpassed US$25 billion annual run rates. Rising memory chip costs were a key reason behind the increase in his capital spending outlook, he said.
Jassy also noted that Amazon now expects computing capacity to remain constrained until the end of 2026, and it anticipates demand will outstrip supply in 2027.
AWS contract backlog increased from US$364 billion to US$496 billion in the previous quarter, reflecting ongoing enterprise demand and long-term commitments from existing customers.
Rising investment in AI Tightens cash flow
Amazon posted free cash flow of US$7.6 billion over 12 months compared to US$18.2 billion a year earlier. Free cash flow at Microsoft, Alphabet and Meta was also reduced by mounting AI infrastructure spending.
This second half has several cash flow considerations, “Since most new data centres receive their first investment at least two years before they start producing revenue.
The CEO also said that customers have already booked the “lion’s share” of AWS compute capacity available to be delivered in 2027 with large amounts also committed for 2028.
Boosting Ad and Retail Continues Growth
AWS expanded itself and partnered with OpenAI, Anthropic, Meta, Pinterest and Snowflake.
The quarterly report also comes during its annual Prime Day, while Amazon rolled out faster delivery services in more international markets and to cities and towns not usually served in the U.S.
Customers splurged more than US$26.4 billion on Prime Day, according to Adobe Analytics. Advertising revenues grew 26% year-on-year to US$19.8 billion.
Source: Reuters
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