Amazon’s cloud division posted its fastest quarterly growth in more than four years during the second quarter, with AWS revenue surging 37% year-over-year to $42.2 billion and delivering a massive earnings beat that sent the company’s stock soaring in after-hours trading on July 30.
The e-commerce and cloud giant crushed Wall Street expectations across the board. Amazon reported earnings per share of $5.75, a 215% beat against analyst consensus of $1.81, according to the company’s official earnings release. Total revenue reached $200.6 billion, up 20% year-over-year and topping consensus estimates by roughly $3.6 billion.
AWS’s 37% growth marked the division’s fastest pace since the fourth quarter of 2021, when it expanded 40%, according to Amazon’s historical earnings reports. The acceleration came as demand for AI infrastructure and cloud services intensified. The company noted that its AI and chips businesses each exceeded $25 billion in annualized revenue run rates, with triple-digit percentage growth year-over-year.
Operating income jumped 43% year-over-year to $27.5 billion, while AWS segment operating income surged to $16.6 billion from $10.2 billion in the same quarter last year. The strong results prompted Amazon to raise its full-year 2026 capital expenditure guidance to $220 billion, up from the $200 billion it had projected earlier. CEO Andy Jassy attributed the $20 billion increase to higher memory chip costs but emphasized that even at the elevated spending level, the company will not have sufficient capacity to meet all the demand it faces this year.
The capex increase reflects the intensity of competition in cloud infrastructure. Microsoft and Google have also reported strong cloud growth driven by AI demand, with Google Cloud delivering 82% growth in Q2 2026 and Microsoft Azure growing 43%, according to recent earnings reports. Across the industry, the four largest hyperscalers—Amazon, Google, Microsoft, and Meta—collectively plan to spend $725 billion on capital expenditures in 2026, up 77% from $410 billion in 2025.
The earnings beat comes with a cost to near-term cash generation. Amazon’s free cash flow swung to a $7.6 billion outflow on a trailing twelve-month basis, down from an inflow of $18.2 billion a year earlier, according to the official earnings release. Operating cash flow still grew 33% to $161.4 billion for the trailing twelve months, but the company’s capital intensity—the ratio of spending to revenue—has reached levels not seen before in its history.
The strong quarter reflected sustained demand from enterprise customers and AI-focused partners. Anthropic, the AI startup in which Amazon has invested up to $25 billion, committed to spending more than $100 billion on AWS infrastructure over the next decade, securing up to 5 gigawatts of new capacity to train and run its models. This partnership has anchored AWS’s AI expansion, with the division’s AI business representing a growing share of overall revenue as customers race to build and deploy large language models and AI agents.
AWS’s acceleration from Q1’s 28% growth to Q2’s 37% reflects the easing of AI chip supply constraints and rising enterprise adoption of cloud-based AI services. The company’s Bedrock platform and custom Trainium and Inferentia chips have become central to its AI strategy, allowing customers to reduce dependence on third-party accelerators while building on AWS infrastructure. Amazon also announced a $1 billion investment in AWS Forward Deployed Engineering, a team of AI engineers embedded directly with customers to deploy agentic AI solutions in days rather than months.
For investors, the earnings report settled a debate that had roiled tech stocks for months: whether the massive spending on AI infrastructure would eventually pay off. AWS’s acceleration, combined with the company’s willingness to raise capex guidance despite near-term free cash flow headwinds, signals confidence that the AI boom will justify the investment for years to come. The market responded with enthusiasm, with Amazon stock surging over 9% in after-hours trading.
Sources
- Amazon Investor Relations — Official Q2 2026 earnings release with revenue, EPS, operating income, and capex guidance
- CNBC — AWS revenue, EPS beat, and analyst expectations comparison
- Reuters — AWS revenue, capex increase, and free cash flow impact
- Yahoo Finance — Stock price reaction and earnings data
- Fortune — CEO Andy Jassy capex commentary and demand capacity constraints
- GeekWire — AWS growth acceleration and AI investment context
- Tom’s Hardware — Big Tech capex spending for 2026 across hyperscalers
