Amazon.com (AMZN) shares were soaring early Friday after the e-commerce giant's second-quarter results topped Wall Street's views amid cloud-computing business strength, while the company lifted its capital expenditure guidance.
Net income jumped to $5.75 a share for the June quarter from $1.68 a year earlier, Amazon said late Thursday. The consensus on FactSet was for $1.82. Net sales climbed 20% to $200.61 billion, surpassing the Street's view for $197.04 billion.
The company's shares were up 11% in premarket activity Friday.
Sales at the Amazon Web Services cloud-computing unit surged 37% to $42.23 billion, marking the fastest growth in 18 quarters. "Customers continue to increase cloud migrations and scale up their use of AWS core services," Chief Financial Officer Brian Olsavsky said during an earnings call late Thursday, according to a FactSet transcript. "As customers invest in (artificial intelligence), we see core spending increase in core consumption."
"We've long believed AWS could become a few hundred-billion-dollar revenue business and now believe it'll be at least double that, and very possibly be a $1 trillion annual revenue business for us in time," Amazon Chief Executive Andy Jassy said on the call.
For 2026, the technology giant now expects to spend roughly $220 billion in cash CapEx, up from its previous estimate of $200 billion, driven by the higher cost of memory, Jassy told analysts. "But 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."
Amazon expects to spend "a lot of CapEx and encounter free cash flow headwinds" in the short term amid strong demand for the development of data centers and before it can start monetizing from them, Jassy said on the call. "But as we get a few years out and the revenue growth outpaces the incremental CapEx growth, which will happen at some point, the resulting revenue, free cash flow and return on invested capital is very compelling."
Second-quarter CapEx came in at $53.1 billion, while free cash flow was a negative $7.6 billion for the trailing 12 months, compared with an inflow of $18.18 billion a year earlier, mainly reflecting AI investments, according to the company.
Recently, Microsoft (MSFT) said it anticipated CapEx in fiscal 2027 to increase year over year, with the metric to exceed $50 billion in its fiscal first quarter. Facebook and Instagram parent Meta Platforms (META) raised the lower end of its CapEx guidance. Alphabet (GOOG, GOOGL) shares came under pressure last week after the Google parent indicated rising AI capital spending that analysts said could drive a bigger cash burn than previously projected.
Amazon delivered the "cleanest beat" among the hyperscalers within Wedbush Securities' coverage, while the e-commerce giant's management also provided the "most explicit walk through" of how it will achieve return on invested capital on its CapEx spend, the brokerage said Friday.
"This clean beat and walk through are the factors in our view on the different share reaction between (Alphabet) and (Amazon) on what we view as similarly strong fundamental prints with raises in CapEx," Wedbush said in a note to clients, as its increased its price target on the Amazon stock to $310 from $293 and reiterated its outperform rating.
For the ongoing quarter, Amazon expects net sales between $197 billion and $202 billion, while the Street is looking for $202.76 billion. Excluding the impact of the company's Prime Day sales event in both 2025 and 2026, this year's September quarter year-over-year growth would be nearly 400 basis points higher, according to the company.
