Amazon AWS Growth Surges As AI Demand Gives Spending A Better Answer

Amazon has given investors the cloud number they were waiting for. After Microsoft and Google raised expectations for AI-driven cloud growth, Amazon Web Services needed to show that it was not losing momentum in the most important infrastructure race in technology. It did.

In its second-quarter earnings release filed with the SEC, Amazon said net sales rose 20 percent year over year to $200.6 billion for the quarter ended June 30, 2026. Operating income rose to $27.5 billion from $19.2 billion a year earlier, while net income jumped to $62.6 billion, or $5.75 per diluted share.

That profit number needs context. Amazon said second-quarter net income included $53.4 billion in non-operating pre-tax other income, primarily from its investments in Anthropic. So the headline EPS looks very strong, but a large part of the net income jump is tied to investment gains rather than only operating performance. The cleaner operating story is still strong, but it is AWS that will get most of the attention.

AWS segment sales rose 37 percent year over year to $42.2 billion, its fastest growth in 18 quarters and a $169 billion annualized revenue run rate. AWS operating income rose to $16.6 billion from $10.2 billion a year earlier. That is a major answer to one of Wall Street strongest questions this earnings season: are hyperscalers spending heavily on AI infrastructure because customers are actually demanding it, or because they are afraid to fall behind?

The market reaction showed how important that number was. MarketWatch noted that Amazon shares rose about 5 percent after hours as AWS revenue beat consensus expectations and accelerated sharply from the first quarter. In a week where investors have punished some companies for high AI spending, Amazon got credit for showing the cloud demand behind the bill.

The rest of Amazon also grew, though less dramatically. North America segment sales increased 16 percent to $116.2 billion, while International sales rose 15 percent to $42.2 billion. North America operating income improved to $9.1 billion, and International operating income reached $1.7 billion. That tells us the retail and marketplace business remains healthier than it looked during the post-pandemic cost reset, but the company is still being valued increasingly through the AWS and AI lens.

That AI lens cuts both ways. Amazon said operating cash flow for the trailing twelve months rose 33 percent to $161.4 billion, but free cash flow moved to an outflow of $7.6 billion. The company said the decline was driven primarily by a $66.1 billion year-over-year increase in purchases of property and equipment, net of proceeds from sales and incentives, and that the increase primarily reflects investments in artificial intelligence.

This is now the central Big Tech earnings theme. Microsoft showed stronger Azure growth, Meta showed that AI spending can hit profit and cash flow, and Amazon is now showing both sides at once. AWS is booming, but the cost of building enough data centres, chips, power capacity and networking infrastructure is also pulling hard on free cash flow. That connects directly with the broader problem of AI data centres and power strain becoming a mainstream business issue.

Amazon also guided for third-quarter net sales between $197 billion and $202 billion, representing growth of 9 percent to 12 percent compared with the same period in 2025. Operating income is expected to land between $22.5 billion and $26.5 billion, compared with $17.4 billion a year earlier. Amazon added that excluding the Prime Day timing impact in both years, third-quarter revenue growth would be nearly 400 basis points higher.

The Anthropic relationship remains another key part of the AWS story. Amazon has been positioning itself as a serious AI infrastructure supplier through Bedrock, Trainium chips and large cloud commitments from AI labs. That is why deals like Recursive Superintelligence signing a $410 million AWS compute agreement matter beyond one customer. They show how AWS is trying to turn AI demand into durable cloud revenue rather than just a spending race.

For Amazon, this quarter is a strong but not simple result. Revenue beat, AWS accelerated, operating income improved and the company gave investors real evidence that AI demand is flowing into its cloud business. The caution is cash flow. If Amazon keeps spending at this pace, every AWS beat will still be measured against the infrastructure bill needed to produce it. For now, though, Amazon has made a better case than most that the AI buildout is already turning into revenue.