Amazon reported post close overnight and delivered a very strong second-quarter result, with AWS growth accelerating for a fifth consecutive quarter and easing concerns around returns on its enormous AI investment. Shares were up ~13% in afterhours trade.
Key results:
- Revenue of US$200.6 billion, ahead of US$197.0 billion expected.
- AWS revenue of US$42.2 billion, up 37% and well ahead of expectations.
- Operating income of US$27.5 billion, versus US$23.6 billion expected.
- AWS AI and Amazon’s chips businesses each surpassed a US$25 billion annual revenue run rate.
Amazon lifted FY26 capital expenditure guidance to US$220 billion from US$200 billion, with most of the spending directed towards AI infrastructure. That investment has pushed trailing 12-month free cash flow to an outflow of US$7.6 billion, although the acceleration in AWS suggests returns are beginning to emerge, and this is what the market will latch onto i.e. proof of returns.
This was a high-quality result, led by exceptional AWS growth and stronger margins across the group. Capex remains eye-watering and free cash flow is under pressure, but unlike some peers, Amazon is showing clear revenue acceleration from its AI investment. The softer third-quarter outlook is worth watching, but the broader direction remains positive.
MM remains bullish AMZN US ~$US235
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