Amazon’s cloud arm is growing fast enough for investors to tolerate another gigantic data centre spending binge.
Amazon Web Services beat expectations, keeping its cloud streak alive while the company raised its capital spending forecast to $220bn. That was a $20bn bump, because apparently AI infrastructure now eats money like a drunk at a kebab shop.
Amazon shares rose more than nine per cent in after-hours trading after Amazon chief executive Andy Jassy told analysts about the bigger capex bill. Jassy pinned part of the rise on dearer memory chips for data centres.
“We’ve long believed AWS could become a few-hundred-billion-dollar-revenue business, and now believe it’ll be at least double that, and very possibly be a trillion-dollar annual revenue business for us in time,” Jassy said.
AWS sales grew 37 per cent year-on-year to $42.2bn for the quarter, its fastest growth rate in 18 quarters. The unit remains Amazon’s profit engine, which explains why investors were less twitchy about the spending spree.
Amazon revenue rose 20 per cent to $200.6bn, while net income hit $62.6bn. Both numbers beat analyst forecasts, which will have soothed anyone fretting about the size of the cheque book.
The company said second quarter net income included $53.4bn of non-operating pre-tax other income, mostly from its Anthropic investments. Its revenue beat Amazon’s own guidance of $194bn to $199bn.
Free cash flow was still ugly, coming in negative at $7.6bn. Amazon forecast third-quarter revenue of $197bn to $202bn, with operating profit between $22.5bn and $26.5bn.
The outfit spent $54.2bn on equipment and property in the second quarter alone. Investors have recently been jumpy about AI spending that does not quickly turn into obvious returns.
Amazon has been one of the most aggressive hyperscalers on capital spending, but it has the largest cloud business to justify the madness. It sells computing power to customers including OpenAI and Anthropic.
Amazon has backed Anthropic since 2023 and said in April it would put as much as $25bn of fresh capital into the AI developer. Anthropic agreed to buy more than $100bn of Amazon cloud services, which is handy when your investor runs the server farm.
According to the Wall Street Journal, Amazon Web Services chief executive Matt Garman said: “Successful leadership in AI will not be built around a single model or a single approach.”
Amazon has kept spending on warehouses and hubs to speed up retail deliveries, while pushing into luxury goods and cars. It moved Prime Day to June from July in most countries this year, and in February passed Walmart as America’s biggest company by annual revenue.
