Amazon beat Wall Street on every headline metric in the second quarter, and Amazon Web Services grew 37% year over year, its fastest pace in 18 quarters.
Shares closed the regular session at $235.50, up 3.90%. The stock then climbed to $256.33 in after-hours trading, a further 8.85% gain, once the numbers landed Thursday.
Why the Amazon Q2 Earnings Beat Matters
Net sales reached $200.6 billion, up 20% from $167.7 billion a year earlier. Analysts had modeled roughly $197 billion.
Operating income rose 43% to $27.5 billion. That lifted the operating margin to 13.7% from 11.4%, against a consensus near 12%.
Diluted earnings landed at $5.75 per share versus estimates around $1.82. However, that comparison flatters the quarter.
Amazon booked $53.4 billion of non-operating pre-tax other income, primarily from its stake in Anthropic, the AI lab behind the Claude models. Strip out that revaluation and the operating result still clears the bar.
Context matters here. Microsoft’s Azure business grew 43% a day earlier, while Meta watched AI spending squeeze margins to 31% from 43%. Investors wanted to know which camp Amazon fell into.
AWS Acceleration Validates the $200 Billion AI Bet
AWS sales hit $42.2 billion, a $169 billion annualized run rate. Growth of 36.7% was the segment’s strongest since 2021.
Profitability moved with it. AWS operating income jumped 64% to $16.6 billion, and the segment margin widened to 39.4% from 32.9%. Amazon therefore bought that acceleration without cutting prices.
“AWS is booming, growing 36.7% year-over-year in Q2 … and our AI and Chips businesses each eclipsed run rates of more than $25 billion,” Andy Jassy, President and CEO of Amazon, in the earnings release.
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Both businesses grew at triple-digit rates. Anthropic and OpenAI have made multi-gigawatt compute commitments to Trainium, Amazon’s in-house AI training chip.
Free Cash Flow Turns Negative as Capex Climbs
The bill is plain to see. Amazon spent $54.2 billion on property and equipment during the quarter alone.
Trailing twelve-month purchases reached $169 billion, a 64% increase. Free cash flow swung to an outflow of $7.6 billion over that period, from an $18.2 billion inflow a year earlier.
Operating cash flow still grew 33% to $161.4 billion, so the draining free cash flow reflects construction rather than weakness in the underlying business.
Guidance handed skeptics something, though. Amazon expects third-quarter sales between $197 billion and $202 billion, short of the roughly $204 billion analysts wanted. Prime Day timing explains nearly 400 basis points of the shortfall, the company said.
Investors who question AI capex returns now face a harder argument. The open question is whether AWS can defend 37% growth once the comparison base rises next year.
