Amazon shares rose nearly 10 percent in after-hours trading Thursday after the company reported second-quarter net sales growth of 20 percent and cloud revenue that exceeded expectations. The move coincided with a raised capital expenditure forecast that would normally pressure a stock.
For the fiscal year ended June 30, Amazon spent $173 billion on property and equipment, a category covering GPUs, natural gas turbines and land, up from $107.65 billion a year earlier. The company also lifted its 2026 capex guidance to $220 billion from $200 billion even as cash reserves fell $7.6 billion over the trailing 12 months, marking the first period of negative free cash flow this year.
AWS revenue grew 37 percent year over year to $42 billion for the quarter. That growth does not offset the capex total in raw arithmetic but signals demand expanding alongside supply, a reassuring sign given the multi-year lag between breaking ground on a data center and selling its capacity.
The spending extends beyond data centers. Amazon is investing in custom silicon including the Trainium TPU and Arm-based Graviton processor, projects that do not appear in capex figures but could improve cloud margins. Chief Executive Andy Jassy said on the earnings call that the AI business is tracking the same margin trajectory as the core business and that AWS can succeed without a single frontier model.
The pattern repeated across cloud hosts. Microsoft and Google shares also rose after reporting strong cloud revenue. By contrast, Meta shares fell 8 percent after its earnings this week as investors focused on its cash flow crunch and continued spending without a clear cloud revenue stream.
The divergence underscores a market view that cloud hosts are the most reliable layer of the AI stack while AI labs and startups face skepticism. But Amazon's hosting revenue is another company's AI bill, in Anthropic's case, literally the same money. If demand for AI does not hold, the revenue base for cloud providers will not be stable either.
The question remains David Cahn's $3 trillion threshold: whether enough demand exists to justify the buildout. Cloud services may be a few steps removed from that demand problem but they are not insulated from it.