Amazon's Q2 beat sends stock up 10% as AWS revenue jumps 37% and capex forecast hits $220B

Amazon reported better-than-expected second-quarter earnings Thursday, with net sales up 20% year over year and cloud revenue standing out as the bright spot. Investors rewarded the results, sending the stock up nearly 10% in after-hours trading.

Despite conventional wisdom that investors want companies to rein in AI spending, Amazon isn't slowing down on data centers. For the fiscal year ended June 30, Amazon spent $173 billion on property and equipment — a category covering GPUs, natural gas turbines and land — up from $107.65 billion the year before.

The company also raised its 2026 capex forecast from $200 billion to $220 billion, even as it has begun tapping cash reserves to help cover the cost. Amazon ended the quarter with $7.6 billion less cash than 12 months ago, marking its first period of negative free cash flow this year.

The spending is backed by a revenue engine: AWS revenue rose 37% year over year to $42 billion in the quarter. That isn't enough to balance the capex in raw arithmetic, but it shows demand growing alongside supply — reassuring for investors given the years-long lag between breaking ground on a data center and selling its capacity.

Amazon's AI bet isn't limited to large data centers. CEO Andy Jassy pointed to long-term investments in chips such as Trainium and the Arm-based Graviton processor, projects that don't show up in capex numbers but can meaningfully improve margins for the cloud business.

"We see the AI business following very much the same margin trajectory we saw in the core business before," Jassy said on the earnings call. "AWS and Amazon Bedrock can have a wildly successful business without its own frontier model... there's not going to be a single model to rule them all."

The pattern extends beyond Amazon: Microsoft and Google shares also popped after strong cloud revenue, while Meta — heavy capex, no clear revenue source — fell 8% after its quarterly report this week as investors focused on its cash flow crunch.

But cloud-hosting revenue is someone else's AI bill. If AI labs and their clients can't sustain that spending, the revenue won't stay stable for Amazon and other cloud hosts, and the question of whether AI demand justifies the buildout remains unanswered.