Amazon to Boost Technology Spending by $20 Billion After Strong Q2 Results

Amazon announced it will increase its capital spending on technology, primarily artificial intelligence, by an additional 10% this year. This decision follows strong second-quarter profits and net sales, significantly boosted by the substantial growth of its cloud computing division.

CEO and President Andy Jassy disclosed to investors that Amazon now anticipates total capital spending to reach $220 billion, a figure that also encompasses investments in robots, semiconductors, and satellites. This represents an increase from the previously announced $200 billion investment plan from February and is well above the $128 billion spent in capital expenditures for the entirety of last year. Jassy attributed the rise primarily to the increased cost of memory chips.

Jassy further stated that even at this elevated spending level, Amazon expects to have insufficient capacity to meet all of the demand it projects for the current year. He indicated this dynamic is likely to persist through 2027, noting that the demand already secured for 2028 is significant.

Despite these substantial investments, Amazon's shares rose more than 9% in after-hours trading. Investors have been closely monitoring the company's quarterly earnings for signs that its considerable spending on AI is beginning to yield returns.

Amazon's cloud computing unit, known as AWS, saw sales increase by 37% during the April-June period. This marks a notable acceleration from the 28% growth rate in the preceding quarter and represents the fastest growth rate in 18 quarters. Jassy highlighted that AWS is "booming," with its AI and chip businesses each surpassing run rates of over $25 billion.

In the retail sector, Amazon reported record delivery speeds for its Prime members in the first half of the year, with 40% more items delivered either same-day or overnight. The company also reported that for the first six months of the year, it more than doubled the number of new customers for its online pharmacy service, with same-day prescription deliveries increasing nearly fivefold.

The company reported a net income of $62.65 billion, or $5.75 per share, for the three months ended June 30. This is a substantial increase compared to the $18.16 billion, or $1.68 per share, reported in the same period last year. Net sales rose to $200.6 billion from $167.7 billion a year ago, exceeding analysts' expectations of $197.03 billion.

Amazon projected net sales for the current quarter to be between $197 billion and $202 billion, while analysts, according to FactSet, anticipated $203.9 billion.

Other tech giants have also reported on their AI and cloud expenditures. Google's parent company, Alphabet, announced better-than-expected revenue for the second quarter, driven by an 82% increase in its cloud business. However, its stock declined as it raised its full-year capital expenditure forecast. Microsoft reported stronger-than-expected profits, with robust growth in its Azure cloud business, but did not announce a significant increase in AI investment, which contributed to a stock boost.