Amazon Raises AI Spending to $220B After AWS Posts Fastest Growth Since 2021

Amazon delivered a blowout second-quarter earnings report Thursday, beating Wall Street expectations on revenue and profit while announcing it would raise its 2026 capital spending on artificial intelligence and cloud infrastructure by $20 billion — even as investors have grown increasingly skeptical about the returns on the industry’s massive AI buildout.

Revenue Jumps 20%, AWS Surges 37%

Amazon Web Services revenue grew nearly 37% year over year in the second quarter, its fastest expansion since 2021, generating $42.23 billion — well ahead of the $40.54 billion analysts had expected. The acceleration from 28% growth in the first quarter surprised Wall Street and sent Amazon shares up more than 9% in after-hours trading.

Total net sales rose 20% to $200.6 billion, and profit more than tripled to $62.6 billion — though that figure included $53.4 billion in non-operating pre-tax income, primarily from Amazon’s investment in Anthropic. Excluding that one-time gain, operating income climbed 43% to $27.5 billion.

Capex Raised to $220 Billion as Jassy Cites Surging Demand

CEO Andy Jassy said on a conference call with investors that Amazon now expects capital expenditures to reach $220 billion this year, up from the $200 billion forecast it had maintained since February. Jassy cited rising memory chip prices as the primary driver of the increase. “But even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too,” Jassy said. “In fact, the demand we already have for 2028 is striking.”

AWS Operating Margins Impress

AWS collected $16.62 billion in second-quarter operating income, well above the $13.62 billion analysts had forecast, with an operating margin of 36.8% — slightly ahead of Google Cloud’s 35.6%. Nearly 61% of Amazon’s overall operating profit now comes from AWS.

AI and Chips Each Top $25 Billion Annual Run Rate

AWS’s artificial intelligence business and its homegrown chips division each brought in over $25 billion in annualized revenue, more than doubling from a year earlier. In the second quarter, AWS announced it would begin hosting OpenAI models, and Meta agreed to use hundreds of thousands of Amazon’s Graviton chips in a three-year deal.

Capital Spending at $54 Billion in Q2 Alone

Capital expenditures totaled $54.21 billion in the second quarter, up 68% year over year and above the $49.35 billion analysts had expected. The surge underscores the scale of Amazon’s commitment to AI infrastructure at a moment when investors are demanding evidence that the spending is generating real returns.

Q3 Guidance Below Expectations

For the third quarter, Amazon said it expects net sales between $197 billion and $202 billion and operating income between $22.5 billion and $26.5 billion. Management said the quarter-to-quarter slowdown from Q2 to Q3 reflects the shift in Prime Day timing and a foreign exchange headwind, and that excluding the Prime Day effect, Q3 growth would have been nearly 400 basis points higher year over year.