Amazon Raises 2026 Capital-Spending Outlook to $220 Billion as AWS Growth Hits Four-Year High
Amazon reported second-quarter results on Thursday, with demand for artificial intelligence driving a 37% year-over-year increase in revenue at AWS, its core cloud business, to $42.2 billion. That was AWS's fastest growth since 2021 and exceeded analysts' 31% expectation. The company also raised its full-year 2026 capital-spending outlook to $220 billion from $200 billion, primarily because of higher memory-chip prices and increased investment in AI infrastructure. Amazon's second-quarter net sales reached $200.6 billion, up 20% from a year earlier, while operating income rose 43% to $27.5 billion. Earnings per share were $5.75, well above the market expectation of $1.81. AWS's annualized revenue has reached $169 billion, and its operating margin increased to 39.4% from 32.9% a year earlier. Chief Executive Andy Jassy said on an investor conference call that the higher capital-spending outlook was driven mainly by continued increases in the prices of storage chips needed to build AI infrastructure. He also said that even if Amazon continues building at the current high-intensity pace, existing capacity still will not fully cover all market demand in 2026. Jassy expects supply-demand tightness to continue in 2027 and said the company has already observed a very significant scale of related demand for 2028. Although the sharp increase in capital spending turned free cash flow over the past 12 months into a negative $7.6 billion outflow, strong AWS growth kept investors confident in the massive investment program. Amazon's shares briefly rose more than 9% in after-hours trading after the results were released. For the third quarter, Amazon forecast revenue of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion. The midpoint of each range was below market expectations.
The company also raised its full-year 2026 capital-spending outlook to $220 billion from $200 billion, primarily because of higher memory-chip prices and increased investment in AI infrastructure.
Amazon's second-quarter net sales reached $200.6 billion, up 20% from a year earlier, while operating income rose 43% to $27.5 billion. Earnings per share were $5.75, well above the market expectation of $1.81. AWS's annualized revenue has reached $169 billion, and its operating margin increased to 39.4% from 32.9% a year earlier.
Chief Executive Andy Jassy said on an investor conference call that the higher capital-spending outlook was driven mainly by continued increases in the prices of storage chips needed to build AI infrastructure. He also said that even if Amazon continues building at the current high-intensity pace, existing capacity still will not fully cover all market demand in 2026. Jassy expects supply-demand tightness to continue in 2027 and said the company has already observed a very significant scale of related demand for 2028.
Although the sharp increase in capital spending turned free cash flow over the past 12 months into a negative $7.6 billion outflow, strong AWS growth kept investors confident in the massive investment program. Amazon's shares briefly rose more than 9% in after-hours trading after the results were released.
For the third quarter, Amazon forecast revenue of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion. The midpoint of each range was below market expectations.