AWS Reignites, and Amazon Answers the Capex Question Alphabet Could Not

Amazon.com, Inc. (AMZN) blew past Wall Street’s June-quarter estimates late Thursday, and investors rewarded the print immediately. Shares jumped roughly 11% in premarket trade before settling near a 3.9% gain, as a re-accelerating cloud unit overshadowed a capital spending budget that keeps climbing. Management pushed 2026 cash capex guidance up to about $220 billion, yet the stock rallied anyway — a sharp contrast to how the market treated Alphabet a week earlier.

Key Points

• Q2 EPS hit $5.75, versus $1.68 a year ago and a $1.82 FactSet consensus.
• Net sales rose 20% to $200.61 billion, topping the $197.04 billion Street view.
• AWS revenue climbed 37% to $42.23 billion, its fastest pace in 18 quarters.
• Cash capex guidance for 2026 moved to roughly $220 billion from $200 billion, driven by memory costs.
• Trailing-twelve-month free cash flow swung to negative $7.6 billion from a positive $18.18 billion.
• Wedbush lifted its price target to $310 from $293 and kept an outperform rating.

The Cloud Does the Heavy Lifting

AWS drove the quarter outright. The unit grew 37% to $42.23 billion, its strongest showing in four and a half years, and CFO Brian Olsavsky tied the acceleration to two reinforcing trends: customers migrating more workloads to the cloud, then expanding core consumption as they build AI on top of them. In other words, AI demand is not cannibalizing traditional cloud spend — it is pulling it along.

CEO Andy Jassy went further, telling analysts he now sees AWS reaching several hundred billion in annual revenue and potentially a trillion dollars over time. Ambitious framing, certainly, but the growth curve gave him room to make it.

Spending Climbs, and Management Owns It

Amazon will spend roughly $220 billion in cash capex this year, up $20 billion from its prior estimate, with rising memory prices absorbing much of the increase. Even so, Jassy warned that capacity will fall short of demand in 2026 and likely again in 2027.

That spending already shows up in the cash flow statement. Q2 capex reached $53.1 billion, and free cash flow over the trailing twelve months flipped to negative $7.6 billion from an $18.18 billion inflow a year earlier. Jassy acknowledged the near-term squeeze directly, then argued that revenue growth will eventually outrun incremental capex and deliver compelling returns on invested capital.

Why Amazon Rallied While Alphabet Slid

Here is the more interesting signal. Alphabet delivered strong fundamentals last week alongside a capex increase and saw its shares pressured. Microsoft has guided fiscal 2027 spending higher, exceeding $50 billion in its fiscal first quarter alone. Meta raised the low end of its own capex range and trades down nearly 8% today on soft revenue guidance.

Wedbush attributes the divergent reactions to disclosure, not fundamentals. The firm called Amazon’s report the cleanest beat among the hyperscalers it covers and singled out management’s explicit walkthrough of how the spending converts into returns. Investors, it seems, will fund enormous AI buildouts — provided executives explain the math.

What to Watch Next

Current-quarter guidance of $197 billion to $202 billion sits just below the $202.76 billion consensus, though Prime Day timing distorts the comparison. Strip out the event’s shifting placement across 2025 and 2026, and Amazon says September-quarter growth would run nearly 400 basis points higher.