Amazon plans to spend $220 billion on capital projects in 2026, $20 billion more than its previous forecast, after a sharp acceleration in cloud demand helped quarterly revenue rise 20% to $200.6 billion. Chief Executive Andy Jassy told investors on Thursday that the additional investment would largely support artificial intelligence, while also covering robots, semiconductors and satellites.
Amazon Web Services generated $42.2 billion in second-quarter sales, up 37% from a year earlier and its fastest growth in 18 quarters, according to Amazon's July 30 results. AWS operating income climbed to $16.6 billion from $10.2 billion. The company said its AI business and its chips business had each passed annualized revenue run rates of $25 billion, indicating that demand for computing capacity is translating into substantial sales.
Group operating income increased 43% to $27.5 billion. Reported net income reached $62.6 billion, or $5.75 per diluted share, compared with $18.2 billion a year earlier, but that figure included $53.4 billion of non-operating pre-tax income primarily linked to Amazon's investment in Anthropic. The investment gain means the net-income increase does not solely reflect improvement in Amazon's underlying retail and cloud operations.
The expansion carries a significant cash cost. Amazon reported a $7.6 billion free-cash-flow outflow for the 12 months through June, reversing an $18.2 billion inflow in the comparable period. The company attributed the swing mainly to a $66.1 billion year-on-year increase in net purchases of property and equipment, primarily for AI. Jassy said higher memory-chip costs drove the latest spending increase and that even the enlarged budget would not satisfy all current demand.
Amazon's consumer businesses also expanded. North American sales rose 16% to $116.2 billion, international sales gained 15% to $42.2 billion and advertising grew 26%. The company said Prime members received more than 40% more items through same-day or overnight delivery during the first half, while the number of new online-pharmacy customers more than doubled. Shares rose more than 9% in after-hours trading, according to the Associated Press and Axios.
For the third quarter, Amazon forecast sales of $197 billion to $202 billion, representing growth of 9% to 12%, and operating income of $22.5 billion to $26.5 billion. The sales range fell below the $203.9 billion analyst consensus cited by the Associated Press, tempering the strong results. Investors will now assess whether faster AWS growth and expanding AI revenue can justify a capital budget far above last year's $128 billion while restoring positive free cash flow.
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