Amazon said it will be increasing this year’s capital spending on technology, mostly artificial intelligence, by an additional 10% after the tech and e-commerce giant delivered strong profits and net sales during for fiscal second quarter, helped by surging growth in its prominent cloud computing unit.
The Seattle-based company said Thursday that sales in its cloud computing unit called AWS rose 37% during the April-June period, faster than the 28% clip in the previous quarter and marking the fastest rate of growth in 18 quarters.
CEO and President Andy Jassy disclosed to investors on the call that Amazon now expects capital spending to total $220 billion, which also includes outlays on robots, semiconductors and satellites. That’s up from the $200 billion investment plan that was announced in February and well above the $128 billion in capital spending for all of last year. Jassy cited the higher cost of memory chips as the main reason for the increase.
Jassy told investors that even at the $220 billion level, Amazon will not have enough capacity to meet all of the demand it has this year.
“I believe this dynamic will also be true in 2027 too,” he added. “In fact, the demand we already have for 2028 is striking.”
Still, shares rose more than 9% in after-hours trading.
Investors had been closely watching Amazon’s quarterly earnings to see if the company’s big spending on AI is starting to pay off.
The Seattle-based company offered a cautious sales outlook for the current quarter.
Amazon was among the last of the tech giants to report its earnings results covering the latest three-month period. The reports offer investors a read on AI spending and cloud computing growth across the industry.
Google parent Alphabet reported better-than-expected revenue for the second quarter last week, fueled by an 82% increase in its cloud business. But the stock tumbled as the tech giant increased its full-year forecast for capital expenditures to a range of $195 billion to $205 billion. That’s up from its previous estimate of $180 billion to $190 billion.
Microsoft, which on Wednesday reported stronger profit for the latest quarter than analysts expected, said growth was strong for its Azure cloud business. The company didn’t announce a big increase in how much it plans to spend on AI investments. That helped to boost shares.
Investors are worried that such spending is eating into companies’ cash flows and may not ultimately be worth it if AI doesn’t deliver as much productivity and profits as promised.
In a statement released Thursday, Jassy said AWS is “booming” and noted that its AI and chips businesses each eclipsed run rates of more than $25 billion. He noted that in stores, the company set record delivery speeds for its Prime members in the first half of the year, noting that 40% more items were delivered either same-day or overnight.
“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,” he said.
Amazon’s results from the latest quarter underscored that demand keeps growing for Amazon’s services and technology.
In April, Amazon signed big deals with OpenAI, Anthropic and Meta.
Amazon announced in April what it called a “major expansion” of its partnership with ChatGPT maker OpenAI one day after the artificial intelligence company said it was loosening its ties to longtime backer Microsoft.
Like other retailers, however, Amazon is experiencing higher tariff costs because of President Donald Trump’s foreign trade policies. Rising shipping costs as the Iran war affects oil and fuel prices also could cut into the company’s e-commerce revenue.
Meanwhile, Amazon has been speeding up order delivery times through a combination of robotics, AI technology and more efficient warehousing. In fact, speedier delivery helped Amazon dethrone Walmart in February from its status as the nation’s largest company by revenue, according to Fortune, which compiles a ranking of the top 500 U.S. corporations by total revenue for their respective fiscal years.
Amazon announced in May it was rapidly opening small order processing hubs in dozens of U.S. and foreign cities for 30-minute deliveries, catering to people who can’t or don’t want to wait for cough medicine to relieve flu symptoms or tomatoes for tonight’s dinner salad.The company said Thursday that for the first six months of the year it more than doubled the number of new customers for its online pharmacy service, while same-day prescription deliveries were up nearly five times.
Amazon also pushed up its big four-day sale event known as Prime Day to June from July this year.
Amazon reported net income of $62.65 billion, or $5.75 per share, in the three-month period ended June 30. That compares with $18.16 billion or $1.68 per share, in the year-ago period.
Net sales rose to $200.6 billion from $167.7 billion a year ago.
Analysts were expecting sales of $197.03 billion for the latest quarter.
Amazon said it expects net sales to be in the range of $197 billion to $202 billion. Analysts expect $203.9 billion, according to FactSet.