Amazon shares climbed nearly 10% in extended trading on Thursday as the company’s cloud computing division posted its strongest expansion since 2021. While heavy investment in artificial intelligence infrastructure resulted in a quarterly cash deficit, the rapid growth of its high-margin web services and advertising businesses satisfied investor demand for evidence of AI-driven returns.
The primary driver for the rally was Amazon Web Services (AWS), which recorded $42.2 billion in revenue, a nearly 37% year-over-year increase that surpassed Wall Street’s expectations. This performance marks a significant acceleration from the previous quarter, driven by unprecedented demand for AI applications. Furthermore, the company’s specialized AI and custom chip divisions have each reached an annualized revenue pace of $25 billion, with both segments seeing triple-digit growth.
Operational efficiency within the cloud sector remained high, with margins reaching 39.4% despite the significant startup expenses associated with new data centers. Management noted that its custom hardware, including Trainium and Graviton processors, is increasingly favored by major AI labs and enterprises for its cost-effectiveness compared to traditional hardware.
For the second quarter of 2026, total revenue reached $200.6 billion, a 20% increase over the prior year. While the reported earnings per share of $5.75 significantly outperformed the anticipated $1.82, the figure was bolstered by a $53.4 billion non-operating pre-tax gain stemming from an increased valuation of Amazon’s investment in AI startup Anthropic.
Core operating income, which excludes such investment fluctuations, rose 43% to $27.5 billion. Outside of cloud services, the company’s advertising arm grew by 26%, while its North American retail division benefited from improved logistics and the timing of Prime Day, which shifted into the second quarter this year.
The aggressive expansion into AI has required substantial capital, with quarterly spending hitting $54.2 billion. Amazon has subsequently increased its total capital expenditure forecast for 2026 to approximately $220 billion, up from an earlier $200 billion estimate. This spending level contributed to a free cash flow deficit of $7.6 billion for the trailing twelve months, a sharp decline from the positive $18.2 billion recorded in the previous period.
Management anticipates third-quarter revenue to fall between $197 billion and $202 billion. While this guidance suggests a slight deceleration compared to the second quarter, the company attributed the difference to the year-over-year impact of the Prime Day calendar shift. Despite the high costs, leadership expressed confidence that the long-term utility of its data center investments—some of which have a 30-year lifecycle—will provide sustained returns as more enterprises migrate to cloud-based AI production.
