Amazon Web Services increased its revenue in the second quarter of 2026 by 37 per cent, to $42.2 billion. This is AWS’s fastest growth in 18 quarters and exceeds market expectations. Amazon has raised its forecast for this year’s capital expenditure from $200 billion to $220 billion, mainly for data centres, AI systems and increasingly expensive memory chips. “AWS is thriving,” said Andy Jassy. He added: “Our artificial intelligence and chip businesses have outperformed with run rates of over $25 billion.”
Demand suggests that investment is beginning to translate into sales. AWS’s backlog of contracted orders rose to $496 billion from $364 billion a quarter earlier. Jassy noted: “Even with this figure, we will still not have sufficient capacity to meet all the demand we have in 2026.” “I believe this trend will also hold true in 2027.” According to him, the “lion’s share” of capacity for 2027 is already reserved, and for 2028 the company has “plenty of capacity” covered by contracts.
However, the cost of expansion is becoming increasingly apparent. Amazon’s free cash flow fell to minus $7.6 billion on a 12-month basis, compared with $18.2 billion a year earlier. Similar pressure is being felt by Microsoft, Alphabet and Meta, whose combined spending on AI is set to exceed $700 billion in 2026.
The results alleviate concerns about excessive infrastructure expansion, but do not eliminate them. Further growth at AWS could strengthen Amazon’s position against Microsoft and Google and increase the availability of AI services. Risks remain in the form of weaker cash flows, energy and chip costs, and excess capacity should demand slow down.
