Amazon shares jump 9% in extended trade on strong results, AWS growth; Capex raised

Shares of Amazon.com Inc. surged over 9% in extended trading on Thursday, July 30, after a strong second quarter earnings performance, led by growth in its cloud business. The company also boosted its capex forecast for the year, citing strong demand in the field of Artificial Intelligence (AI).

Amazon reported revenue of $200.61 billion during the quarter, higher than estimates of $196.47 billion. The Earnings Per Share (EPS) stood at $5.75, which was not comparable with estimates.

Growth came from the Amazon Web Service, the company's cloud business, which grew by 37% from last year during the quarter, the fastest since 2021, for the fifth quarter running, and also surpassing Wall Street expectations of 31% growth. While AWS is larger than its peers Google Cloud and Microsoft Azure, its growth lagged them during the quarter. Google Cloud grew 82% year-on-year, while Azure reported 43% growth.

The company now expects to spend up to $220 billion this year, higher than the $200 billion projected in February this year and kept steady in April. CEO Andy Jassy said that the rising prices of memory chips is pushing capex higher and the spending spree is unlikely to come down anytime soon.

Jassy went on to add that even after spending on this scale, Amazon will not have enough capacity to meet all the demand in 2026 and possibly in 2027 as well. "In fact, the demand we already have for 2028 is striking," he said during the earnings call.

Both AWS and Amazon's chip units exceeded $25 billion in annual revenue run-rate. The company is pushing its in-house chips division Trainium and Graviton brands as a new growth engine for the company.

However, the spending spree caused Amazon's free cash flow to turn negative for the quarter at $7.6 billion, compared to a positive $18.2 billion in the year-ago quarter. Yet, the street appreciated the strong results. It also disregarded the company's current quarter revenue guidance of $197 billion to $202 billion, which turned out to be lower than expectations of $204 billion.

Shares of Amazon ended 9.3% higher in extended trade at $257.47. As of closing on regular trading on Thursday the stock had turned positive year-to-date with gains of 4%.