Amazon's AI Bet: Cloud Revenue Soars, Capex Balloons to $220B

Amazon exceeded expectations with its Q2 earnings, showing a 20% increase in net sales and a remarkable 37% rise in cloud revenue, reaching $42 billion year over year. This news propelled its stock up nearly 10% in after-hours trading. The company is heavily investing in AI infrastructure, allocating $173 billion for property and equipment in the fiscal year ending June 30, a significant increase from $107.65 billion the previous year, and has raised its 2026 capital expenditure forecast from $200 billion to $220 billion. This investment has resulted in negative free cash flow for the first time this year, with cash reserves decreasing by $7.6 billion. CEO Andy Jassy emphasized that AWS and Amazon Bedrock can thrive without a dominant frontier model. Meanwhile, shares of Microsoft and Google rose due to strong cloud revenue, while Meta's stock fell 8% amid high capital expenditures and uncertain revenue. Investors currently see cloud providers as the most dependable segment of the AI ecosystem, although the long-term sustainability of AI demand remains in question, reflecting David Cahn's $3 trillion inquiry.