Amazon delivered a second quarter that made the skeptics look a little silly. Revenue climbed 20 percent year on year to $200.6 billion. Operating income jumped 43 percent to $27.5 billion. The stock ripped higher after hours, because the market finally got what it had been waiting for: proof that the AI spend is actually showing up in the numbers.
AWS posts its best growth since 2022
The cloud division grew 37 percent to $42.2 billion, its fastest pace in more than four years. That is not a typo. After quarters of deceleration and hand-wringing about optimization cycles, enterprises apparently decided the optimization was done and the GPU orders could start. AWS remains the profit engine, and it just threw a piston.
The AI business is already a $50 billion run rate
Amazon said its AI services and its custom chip operations have each crossed a $25 billion annualized revenue run rate. That is $50 billion combined, built on Trainium chips and Graviton processors that the company designs itself. The silicon strategy, long dismissed as a hobby, is now a meaningful revenue line. The irony that a retailer became a chipmaker to feed its own cloud customers is not lost on anyone who has followed this story.
Capex gets another $20 billion
Management raised 2026 capital expenditure by $20 billion to roughly $220 billion. The extra money goes to AI data centers, custom silicon, and cloud infrastructure. Free cash flow will take the hit in the near term. Investors cheered anyway. The market has decided it prefers aggressive reinvestment over a buyback yield that rounds to zero.
The narrative has flipped
For a year the bear case was simple: Amazon is spending like a drunken sailor on AI with no visible return. The bull case was: wait for the cycle. This quarter the cycle arrived. AWS accelerated. The AI businesses scaled. The capex guide went up, not down. The stock reacted the way it does when a thesis gets validated, violently. Whether the returns sustain is the only question that matters now. The spending machine is not slowing down.