Amazon raised its 2026 capital expenditure target to $220 billion on Thursday, a $20 billion increase driven by soaring memory costs, even as second-quarter cloud growth accelerated to its fastest pace since 2021 and the stock surged more than 10% after hours. The revision, the second this year after a steady $200 billion forecast in February and April, arrived alongside earnings that blew past estimates: $5.75 a share versus the $1.82 analysts expected, on revenue of $200.6 billion against a $196.5 billion consensus.
The spending machine accelerates
Chief executive Andy Jassy blamed rising memory prices for the capex bump but made clear the spending spree has no visible endpoint. "Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too," he told investors. The demand booked for 2028, he added, is "striking." Quarterly capex hit $54.2 billion, up from $32.1 billion a year earlier, pushing trailing twelve-month free cash flow to a $7.6 billion outflow from an $18.2 billion inflow.
Cloud growth outpaces the hyperscalers
Amazon Web Services revenue grew 37% year over year to $42.2 billion, beating the $40.5 billion estimate and outpacing Microsoft's Azure at 43% and Google Cloud at 82%, though on a far larger base. Jassy said AWS is "booming," noting that both its AI business and its homegrown chips division, spanning Trainium and Graviton, now exceed a $25 billion annual revenue run rate. The segment's $496 billion backlog of contracted work not yet online underscores the visibility behind the spend.
The cash flow trade-off
Investors have been jittery about the return on all that silicon and steel. Thursday's reaction suggests the market is willing to finance the build-out so long as growth keeps accelerating. Advertising revenue of $19.8 billion also topped the $19.4 billion estimate, providing a high-margin cushion. But the free cash flow flip is real, and the guidance for the current quarter, $197 billion to $202 billion versus a $204.1 billion consensus, shows the Prime Day calendar shift will muddy the near-term picture.
What to watch next
Amazon does not disclose Prime Day revenue, but Adobe measured a 9% rise in U.S. online sales to $26.4 billion during the event, which moved to June from July. Excluding that distortion, third-quarter growth would be nearly 400 basis points higher. The real signal is whether the $220 billion plan, now above Alphabet's $205 billion ceiling, buys enough capacity to turn the backlog into revenue before the memory cycle turns.