Amazon Increases Its Investment Plans, And Its Stock Rises Following Robust Cloud Sales

Amazon (AMZN.O) strengthened its claim that significant investment in AI is creating enough demand to justify the expenditures by opening a new tab, delivering its best cloud growth in over four years, and raising its annual capital spending forecast.

The findings provided insight into whether the hundreds of billions of dollars being invested in AI data centers and processors are yielding sufficient returns, a crucial concern that hung over Amazon and its Big Tech rivals.

Despite increasing its capital spending plan by 10% to $220 billion, Amazon CEO Andy Jassy stated that the company still lacked sufficient computer capacity to serve consumers due to the high demand.

After rising 3.9% during the trading session, shares of the Seattle-based online retailer increased by almost 9% after the market closed.

According to figures provided by LSEG, revenue at its cloud computing division, Amazon Web Services, surged 37% to $42.2 billion in the second quarter ended June 30, easily surpassing analysts’ consensus expectation of a 31.21% growth.In a statement, Jassy added, “AWS is booming,” pointing out that this was the unit’s strongest growth in around eighteen quarters. “Our AI and chips businesses each eclipsed run rates of more than $25 billion.”

He claimed that one of the main reasons the company’s capital spending forecast increased was the cost of buying memory chips.

He stated, “Even at that amount, we will still not have enough capacity to meet all of the demand we have in 2026,” during an investor call. “I believe this dynamic will also be true in 2027 too.”

AWS contract backlogs increased from $364 billion in the previous three months to $496 billion at the conclusion of the quarter.

The free cash flow of Amazon became drastically negative. In the second quarter, the company’s trailing 12-month cash burn was $7.6 billion, while a year prior, its free cash flow was $18.2 billion.

Other major tech rivals, such as Microsoft (MSFT.O), Alphabet (GOOGL.O), and Meta (META.O), all reported significant declines in free cash flow as they ramp up spending.