Amazon is pouring more money into artificial intelligence infrastructure than ever before. The e-commerce and cloud giant raised its 2026 capital expenditure forecast to $220 billion, up from $200 billion, citing rising memory costs and insatiable demand for AI services.
The announcement came alongside Amazon’s second-quarter earnings report, which showed record-breaking revenue and accelerating growth in its cloud computing division. Shares jumped more than 10% in after-hours trading following the results.
Record Revenue and Cloud Growth
Amazon reported second-quarter revenue of $200.61 billion, beating analyst estimates of $196.47 billion. This marked the first time the company crossed the $200 billion threshold in a single quarter.
Earnings per share came in at $1.97 on an adjusted basis, ahead of the $1.82 expected by Wall Street. Net income for the quarter totaled $62.6 billion, or $5.75 per share, compared with $18.2 billion a year earlier. A significant portion of that gain—$53.4 billion in pre-tax income—came from a mark-to-market adjustment on Amazon’s stake in AI startup Anthropic, rather than core operating profits.
The standout performer was Amazon Web Services, the company’s cloud computing arm. AWS revenue grew 37% year over year to $42.2 billion, surpassing expectations of $40.54 billion. This represented the division’s fastest growth rate since 2021.
Advertising revenue also exceeded forecasts, reaching $19.81 billion compared to $19.43 billion expected.
Why Capex Is Climbing
CEO Andy Jassy explained on the earnings call that higher memory prices were driving the increased spending outlook. The company spent $54.2 billion on capital expenditures during the quarter, up from $32.1 billion a year earlier.
Despite the hefty investment, Jassy said Amazon still won’t have enough capacity to meet customer demand through 2027—and possibly into 2028. “In fact, the demand we already have for 2028 is striking,” he told investors.
The AWS backlog, representing contracted work not yet delivered, reached $496 billion during the quarter.
Free Cash Flow Turns Negative
The aggressive spending has taken a toll on Amazon’s cash position. Trailing twelve-month free cash flow flipped to a negative $7.6 billion, down from a positive $18.2 billion a year earlier.
Jassy emphasized that the investments are necessary to keep pace with surging demand for cloud and AI services. Operating cash flow for the trailing twelve months grew 33% to $161.4 billion, but capital expenditures grew even faster, up 64% to $169 billion.
Guidance and Headwinds
For the current quarter, Amazon guided for revenue between $197 billion and $202 billion, slightly below analyst expectations of $204.1 billion. The company attributed the softer outlook to the timing of Prime Day, which shifted from July to June this year.
Excluding the Prime Day shift, third-quarter 2026 growth would be nearly 400 basis points higher, Amazon said. U.S. online retail sales during the weeklong Prime Day event grew 9% to $26.4 billion, according to Adobe.
Operating income for the third quarter is expected to range from $22.5 billion to $26.5 billion, compared to analyst forecasts of $24.92 billion.
Other Highlights
Amazon also reported strong growth in its healthcare initiatives. The company more than doubled new customer sign-ups for Amazon Pharmacy and grew same-day prescription deliveries nearly fivefold.
The company’s in-house chip division, including Trainium and Graviton processors, now exceeds a $25 billion annual revenue run rate, alongside its AI products like the Bedrock model marketplace.
What This Means for Investors
Amazon’s earnings paint a picture of a company betting heavily on AI and cloud infrastructure—even at the cost of short-term cash flow. With AWS growth reaccelerating and demand for AI services showing no signs of slowing, the company is positioning itself to maintain its lead in the cloud wars against rivals like Microsoft Azure and Google Cloud.
The question for investors is whether the massive capital outlays will translate into proportional returns. Jassy insisted they will, pointing to the $496 billion backlog and multi-year demand visibility.
For now, Wall Street appears to be rewarding Amazon’s aggressive stance. The stock’s double-digit pop after hours suggests confidence that the company’s AI investments will pay off in the years ahead.