Amazon revenue soars as AI investments pay off
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Amazon's AI cloud business soared in the second quarter, driving far higher revenue than expected, though the company's free cash flow also turned negative as it invests heavily in the business.
- Amazon shares surged 9.4% in after-hours trading.
Why it matters: The surging AI economy — centered around cloud companies like Amazon, hyperscalers and data center investments — is booming, even as questions are mounting about whether it's sustainable.
Driving the news: Amazon delivered a 20% increase in net sales to $200.6 billion, easily topping S&P Capital IQ expectations of $196.4 billion.
- Much of the gain came from a triple-digit growth in Amazon Web Services' AI business and triple-digit growth in its chips business — both of which now represent an annualized revenue rate of $25 billion.
Zoom in: Amazon's North America sales rose 16%, international sales increased 15%, and AWS sales jumped 37%.
- The company recorded net income of $62.6 billion, with $53.4 billion of that attributable to pre-tax gains stemming primarily from the company's investment in Claude maker Anthropic.
- "The strong showing from the world's No. 1 cloud services provider mirrors solid performances from smaller rivals Microsoft and Alphabet's Google, both of which comfortably beat Wall Street estimates for cloud revenue," Reuters noted.
Yes, but: Amazon's free cash flow in the 12-month period ended June 30 amounted to an outflow of $7.6 billion, down from an inflow of $18.2 billion in the comparable period a year earlier.
