Amazon AWS growth reaches 37% as capacity demand and memory costs lift 2026 spending plan

Amazon reported a substantially stronger cloud quarter, with Amazon Web Services revenue increasing 37% year over year to $42.2 billion. That compared with an LSEG consensus estimate for 31.21% growth cited by Reuters, establishing the clearest expectation gap in the company’s second-quarter results.

The 37% increase was AWS’s fastest growth in 18 quarters and lifted the segment to a $169 billion annualized revenue run rate, according to Amazon’s July 30 results announcement. AWS operating income reached $16.6 billion, up from $10.2 billion a year earlier, and accounted for about 60% of Amazon’s $27.5 billion consolidated operating income.

Capacity demand and a larger infrastructure budget

Chief Executive Andy Jassy said Amazon’s AWS artificial-intelligence business and its chips business had each exceeded annual revenue run rates of $25 billion. Amazon said both businesses were growing at triple-digit percentages year over year.

The company also disclosed multi-year, multi-gigawatt Trainium infrastructure commitments from Anthropic and OpenAI, as well as commitments from additional startups and established customers. The agreements provide demand context for Amazon’s investment in internally designed chips and artificial-intelligence capacity, without isolating how much of the quarter’s AWS growth came from those commitments.

Amazon raised planned 2026 capital spending from $200 billion to $220 billion. Jassy identified higher memory-chip costs as the primary reason for the incremental increase and said Amazon would still lack enough computing capacity to meet all expected demand in 2026, according to the Associated Press.

Management expects the capacity constraint to extend beyond this year. Jassy said the supply-demand imbalance was likely to persist in 2027, while Reuters reported that most of the AWS computing capacity planned for 2027 had already been reserved by customers.

Cash flow reflects the buildout

Amazon’s trailing-12-month free cash flow was an outflow of $7.6 billion, compared with an inflow of $18.2 billion a year earlier. The company attributed the deterioration primarily to a $66.1 billion year-over-year increase in purchases of property and equipment, net of proceeds and equipment acquired under leases, largely reflecting artificial-intelligence investment.

Companywide net sales increased 20% to $200.6 billion, while operating income increased 43% to $27.5 billion. Diluted earnings were $5.75 per share, including $53.4 billion of pre-tax non-operating income primarily related to Amazon’s investment in Anthropic.

North America sales increased 16% to $116.2 billion and segment operating income reached $9.1 billion. International sales increased 15% to $42.2 billion, with operating income of $1.7 billion. Advertising services revenue increased 26% to $19.8 billion.

Guidance and sector read-through

Amazon forecast third-quarter net sales of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion. The revenue range was below the $203.9 billion FactSet analyst estimate cited by the Associated Press.

The AWS result follows strong cloud growth reported by Microsoft and Alphabet and adds evidence that enterprise cloud and artificial-intelligence workloads are supporting hyperscaler demand. Amazon’s larger infrastructure budget is relevant to US-listed semiconductor, memory, networking, server and data-center suppliers, while its negative free-cash-flow profile keeps spending efficiency and capacity utilization central to the sector read-through.

The disclosures to monitor next are AWS operating margin, the conversion of contracted commitments into recognized revenue, the timing at which newly installed capacity becomes available, free-cash-flow performance and any further revision to the $220 billion capital-spending plan.