Amazon shares jump as AWS growth accelerates and capital spending rises

Traders Union
All News
Financial News
Amazon shares jump on AWS growth

Highlights

Amazon Web Services sales rose 37 percent year-on-year to $42.2bn in Q2, surpassing analysts’ estimates and boosting Amazon shares up 9 percent after-hours.
Group operating income climbed 43 percent to $27.5bn, while quarterly capital expenditure rose to $53bn, with 2024 capex guidance set at $200bn mainly for AI and data centers.
Amazon raised $25bn in bonds this month but faced lower demand for long-dated debt, reflecting market concerns about the company's aggressive investment in cloud and AI amid negative free cash flow.

AWS growth lifts quarterly performance

As reported by Financial Times, Amazon says sales at Amazon Web Services, its cloud unit, rise 37 per cent year-on-year to $42.2bn in the quarter ending in June, beating analysts’ expectations.

Operating income across the group, which includes advertising, ecommerce and media, climbs 43 per cent to $27.5bn. In after-hours trading on Thursday, the results push Amazon shares as much as 9 per cent higher.

Chief executive Andy Jassy tells investors before the company’s earnings call that “AWS is booming”. Amazon is seeking to expand AWS aggressively as it faces pressure from smaller rivals including Google and tries to defend its leading position in cloud services while competing in AI.

AI investment raises spending and funding pressure

Group capital expenditure climbs to $53bn in the quarter, while free cash flow turns negative on a trailing 12-month basis to $7.6bn. Amazon expects capital expenditure this year to reach $200bn, with most of that spending directed towards AI and data centre infrastructure.

The company has also carried out sweeping lay-offs as it works to cut costs and support its heavy AI investment programme. In March, Amazon set out plans to raise $50bn through corporate bond issuances, increasing the offering from $37bn after strong demand.

Even so, the financing environment shows some strain earlier this month when Amazon sells $25bn in bonds and faces weaker interest in long-dated debt, with investors demanding wider spreads. That suggests the scale of the group’s investment cycle remains a key issue for markets as it balances growth in cloud and AI against rising capital needs.

Microsoft’s outlook-driven tech rebound was the focus of our earlier coverage, as the company’s stronger Azure growth forecast helped shift investor attention from the cost of AI buildouts to the revenues they can generate. We also noted that Microsoft kept its spending plans intact, easing concerns that data-center and AI infrastructure investment could outpace demand and weigh on cash flow.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.