What to know:
- Amazon Stock jumped over 9.5% after hours after reporting stronger-than-expected Q2 earnings and revenue.
- AWS revenue reached $42.2 billion, beating estimates and delivering its fastest annual growth since 2021.
- Amazon raised its 2026 AI infrastructure investment outlook, increasing planned capital spending to around $220 billion.
Amazon stock rose in after-hours trade following strong Q2 earnings, which came on the back of cloud performance and increased AI infrastructure needs. The company’s earnings improved investors’ confidence since the firm gains from cloud spending amidst increased AI investments.
The closing price of the stock on July 30 was $235.50, which was 3.90% higher than the closing price of $226.65 the day before. After the earnings were announced, Amazon stock increased by 9.55%.
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Amazon Stock Gains as AWS Revenue Beats Expectations
The firm posted revenues of $200.61 billion, which comfortably beat analysts’ forecast of $196.47 billion for the quarter.
The cloud service unit of Amazon, AWS, continued to be its strongest area for growth. AWS posted revenues of $42.2 billion for the quarter, which comfortably beat estimates of $40.54 billion. The division also grew by 37% on an annual basis, which was its best growth rate since 2021 and surpassed forecasts of 31%.
The company’s advertising unit also performed well, posting revenues of $19.81 billion, which topped forecasts of $19.43 billion.
The high performance from AWS clearly indicates that firms are continuously growing their investments in cloud computing and artificial intelligence. According to the CEO of Amazon, Andy Jassy, there is still greater customer demand compared to the existing capacity at Amazon, and the firm will continue experiencing shortages of supply until 2026 and even 2027.
Amazon Stock Supported by Higher AI Investment
Amazon has increased its projected capital expenditure for the year to approximately $220 billion from an earlier estimate of $200 billion, underscoring its dedication to increasing AI infrastructure.
In the June quarter, Amazon has spent $54.2 billion, up from $32.1 billion that was spent in the corresponding quarter last year. This extra amount of money will be spent on constructing new data centers, buying servers, designing AI chips, and creating more cloud infrastructure to meet rising customer demands.
This extra spending has led to changes in cash flow. Amazon registered a trailing 12-month negative free cash flow of $7.6 billion, against positive free cash flow of $18.2 billion last year.
Amazon Stock Rallies Despite Softer Revenue Outlook
For the future, Amazon is projecting Q3 revenues in the range of $197 billion to $202 billion, below the analyst estimate of $204.1 billion.
According to Amazon, one of the reasons for the reduction in expectations was related to the change in Prime Day timing in the fiscal year 2023 from July to June.
Despite this cautious outlook and increased costs, Amazon Stock managed to continue rising despite the Q1 results. The main reason for this was the fast-growing AWS segment, along with the growing AI division and opportunities in the field of cloud computing for the future.
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