Amazon Shares Soar Nearly 15% After Record AWS Growth Calms Investor Fears Over Massive AI Investments

NEW YORK — Amazon.com Inc. shares surged nearly 15% on Friday, climbing $34.79 to $270.29, after the company reported second-quarter results that showed its cloud computing division accelerating at the fastest pace in more than four years, easing investor concerns that heavy spending on artificial intelligence infrastructure was not yet generating sufficient returns.

The rally, one of the stock’s strongest single-day performances in years, added roughly $300 billion to Amazon’s market value and helped lift broader technology indexes. Investors focused on robust demand at Amazon Web Services, the company’s most profitable segment, rather than a higher capital expenditure forecast or a swing into negative free cash flow driven by AI investments.

Amazon reported net sales of $200.6 billion for the quarter ended June 30, up 20% from $167.7 billion a year earlier and above analysts’ consensus estimates near $196 billion to $197 billion. Operating income rose 43% to $27.5 billion. Diluted earnings per share reached $5.75, far exceeding the roughly $1.82 Wall Street expected, though the figure included a large non-operating gain primarily from the mark-up of Amazon’s investment in Anthropic.

The standout was Amazon Web Services. AWS revenue jumped 37% to $42.2 billion, or 36.7% on a year-over-year basis, marking the unit’s strongest growth in 18 quarters and its fifth consecutive quarter of acceleration. The cloud business generated an annualized revenue run rate of $169 billion. Operating income for AWS climbed to $16.6 billion, producing a 39.4% operating margin, up substantially from the year-ago period.

Amazon said its AI and custom chips businesses each surpassed annualized revenue run rates of more than $25 billion, both growing at triple-digit percentages. The AWS contract backlog expanded to $496 billion.

“AWS is booming, growing 36.7% year-over-year in Q2 — our fastest growth in 18 quarters — and our AI and Chips businesses each eclipsed run rates of more than $25 billion,” Amazon President and CEO Andy Jassy said in the company’s statement. “In Stores, we again set record delivery speeds for Prime members in the first half of the year — over 40% more items delivered same-day or overnight, with Grocery and Everyday Essentials growing meaningfully faster than the rest of the business. And, Advertising had another strong quarter with 26% year-over-year growth. There’s a lot to be excited about, and we have much more coming for customers in the second half of the year and beyond.”

Jassy told investors on the earnings call that demand for computing capacity remains so strong that Amazon still cannot fully meet customer needs despite raising its 2026 capital expenditure outlook. The company now expects cash capital expenditures of approximately $220 billion for the year, up from a prior estimate of about $200 billion. Higher memory costs contributed to the increase. Much of the spending is directed toward AI infrastructure.

“Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026,” Jassy said. “I believe this dynamic will also be true in 2027 too.” He added that the “lion’s share” of planned AWS capacity for 2027 has already been reserved by customers, with substantial commitments extending into 2028. Jassy has described Amazon as “unusually well-positioned for this AI inflection.”

The results arrived amid intense scrutiny of Big Tech’s AI spending. Microsoft and Alphabet earlier reported strong cloud growth, while some peers saw their shares pressured by higher capital plans and weaker free cash flow. Amazon’s free cash flow turned negative, with a trailing twelve-month outflow of $7.6 billion compared with an $18.2 billion inflow a year earlier, reflecting a $66.1 billion year-over-year rise in equipment purchases tied largely to AI.

Investors largely looked past those figures. Evercore ISI analyst Mark Mahaney called the quarter “the breakout that the stock needed,” noting that AWS delivered its strongest growth in 18 quarters while expanding operating margins. JPMorgan analysts raised their price target to $365 from $330, saying they were “encouraged by the strength in the core AWS business, which has a high correlation with AI revenue,” and that they expect the relationship to strengthen as more AI workloads move into production.

At least a dozen brokerages lifted price targets following the report. Amazon’s price-to-earnings ratio stood near 25, still above some peers but reflecting renewed confidence in the company’s ability to monetize AI investments.

Other parts of the business also contributed. North America sales rose 16% to $116.2 billion. International sales increased 15% to $42.2 billion. Advertising revenue grew 26%. Amazon continued to emphasize faster delivery speeds and expansion in grocery and everyday essentials. The company highlighted progress with its Trainium custom chips, Graviton processors, Amazon Bedrock foundation model platform, and new agentic AI tools.

For the third quarter, Amazon guided net sales between $197 billion and $202 billion, representing 9% to 12% growth, or nearly 400 basis points higher when adjusting for the timing of Prime Day. Operating income is expected between $22.5 billion and $26.5 billion. The guidance incorporates an estimated 80-basis-point headwind from foreign exchange rates.

Amazon’s results underscored a shift in investor focus across the sector. After months of debate over whether vast AI capital outlays would deliver timely returns, the combination of accelerating AWS growth, expanding margins, and visible demand for both AI and core cloud services provided tangible evidence that spending was translating into revenue. The company noted that data centers typically require about two years of lead time before generating revenue but can operate for decades, while AI servers often recover their costs in under three years.

Shares had closed at $235.50 on Thursday before the after-hours and Friday surge. The move ranked among the largest percentage gains for Amazon in recent years and positioned the stock near multi-month highs. Volume was elevated as the company became one of the day’s most actively traded names and a leading contributor to gains in the Nasdaq 100 and S&P 500.

The performance also reflected broader market dynamics. Technology stocks led U.S. equity futures higher, with the Amazon rally offsetting softer moves in other names. Analysts noted that the quarter helped distinguish Amazon’s approach — tying incremental capital spending closely to existing customer demand and backlog — from peers still facing questions about the timeline of AI monetization.

Amazon continues to expand its AI-related offerings, including additional foundation models on Bedrock, new agent capabilities, and infrastructure tailored for agentic workloads. Commitments from major AI labs and enterprise customers for both cloud capacity and custom silicon have reinforced management’s confidence in multi-year demand.

While free cash flow remains under pressure in the near term and third-quarter guidance came in somewhat softer than some estimates on a reported basis, the market’s reaction centered on the acceleration in AWS and the visibility provided by the growing backlog. For investors who have watched Big Tech pour hundreds of billions into AI infrastructure this year, Amazon’s report offered the clearest signal yet that those investments are beginning to show measurable returns in both growth and profitability.

The stock’s sharp advance on Friday closed a volatile stretch for the shares and reinforced Amazon’s central role in the ongoing AI infrastructure build-out.