Key highlights:
- Amazon shares jumped more than 11% in premarket trading after the company reported second-quarter earnings that comfortably beat Wall Street estimates
- AWS grew 36.7% year over year, its fastest pace in 18 quarters, while Amazon’s AI and custom chip businesses each surpassed a $25 billion annual revenue run rate
- The company continues to accelerate AI investments despite a sharp decline in free cash flow driven by higher infrastructure spending
Amazon rallies after another blockbuster quarter
Amazon (AMZN) surged in premarket trading after delivering another quarter of stronger-than-expected financial results, reinforcing investor confidence that its massive artificial intelligence investments are beginning to pay off.
The e-commerce and cloud computing giant reported earnings per share of $5.75 on $200.6 billion in revenue for the second quarter, comfortably exceeding analyst expectations of $1.82 per share on $197 billion in revenue.
The strong report pushed Amazon shares up more than 11% before the opening bell, adding to the growing momentum among mega-cap technology companies benefiting from the AI spending boom.
AWS posts fastest growth in over four years
Amazon Web Services remained the biggest driver of the company’s performance.
AWS generated $42.2 billion in quarterly revenue, beating analyst forecasts of roughly $40.5 billion while delivering 36.7% year-over-year growth—its fastest expansion in 18 quarters.
Chief Executive Andy Jassy highlighted the accelerating demand for artificial intelligence infrastructure, noting that both Amazon’s AI services and its custom silicon business have now surpassed $25 billion in annualized revenue run rates.
The milestone underscores Amazon’s growing influence in enterprise AI, where its Trainium and Inferentia chips are increasingly competing with Nvidia-powered infrastructure.
Amazon has also expanded its chip business by supplying computing capacity to major AI developers, including Anthropic, Meta, and OpenAI, while exploring opportunities to sell custom AI chips directly to enterprise customers.
Advertising and retail businesses continue to deliver
Amazon’s cloud business was not the only bright spot.
The company’s advertising segment grew 26% year over year, continuing to strengthen its position as one of the world’s largest digital advertising platforms.
Its retail operations also showed resilience despite a challenging consumer environment.
Jassy said Prime members experienced the fastest delivery speeds on record during the first half of the year, with same-day and overnight deliveries increasing by more than 40% compared to a year earlier. Grocery and everyday essentials also continued to outpace growth across the broader retail business.
North American net sales climbed to $116.1 billion, reflecting continued strength across Amazon’s core commerce operations.
AI spending pressures cash flow
Despite the impressive financial performance, Amazon’s aggressive AI expansion continues to weigh on cash generation.
The company reported negative free cash flow of $7.6 billion, representing a significant decline from the previous year as billions of dollars continue flowing into AI data centers, networking infrastructure, and custom chip development.
Management, however, continues to frame the spending as a long-term investment rather than a short-term expense.
The results echo similar strategies adopted by Microsoft, Alphabet, and Meta, all of which have significantly increased capital expenditures to secure computing capacity for the next generation of AI applications.
Wall Street rewards execution
Amazon’s earnings arrived just days after Microsoft reported blockbuster results that validated its own AI spending strategy.
Unlike some technology companies that have faced investor skepticism over rising capital expenditures, Amazon’s strong cloud acceleration and expanding AI business reassured investors that the company is successfully converting infrastructure investments into revenue growth.
The quarter also reinforces Amazon’s increasingly diversified business model.
While AWS remains the primary growth engine, expanding advertising revenue, improving retail performance, and the rapid commercialization of AI services provide multiple avenues for future growth.
With AWS posting its fastest growth in more than four years and Amazon’s AI businesses now operating at a $25 billion annual run rate, investors appear increasingly convinced that the company’s multibillion-dollar AI strategy is beginning to generate meaningful financial returns.
Source:: Amazon Stock Soars After Blowout Q2 Earnings as AWS AI and Chip Businesses Hit $25 Billion Run Rate