Amazon has raised its annual capital spending forecast to US$220 billion after its cloud computing business delivered its strongest growth in more than four years, strengthening confidence that its heavy investment in artificial intelligence infrastructure is generating stronger demand.
Shares of the Seattle-based technology giant rose nearly 9% after markets closed following the results, which showed Amazon Web Services (AWS) revenue jumped 37% to US$42.2 billion in the second quarter ended 30 June, beating analyst expectations of a 31.21% increase.
Amazon chief executive officer Andy Jassy said demand for computing capacity remained strong, with the company still unable to fully meet customer needs despite increasing its spending plans by 10%.
“AWS is booming,” Jassy said, adding that Amazon’s AI and chip businesses had each exceeded annualised revenue rates of more than US$25 billion.
AWS contract backlogs also expanded significantly, reaching US$496 billion at the end of the quarter compared with US$364 billion in the previous three-month period, reflecting continued demand for cloud infrastructure.
However, the increased investment weighed on cash flow, with Amazon recording a US$7.6 billion cash burn over the past 12 months in the second quarter compared with US$18.2 billion in free cash flow a year earlier.
Analysts said the results eased concerns over whether major technology companies were spending too heavily on AI infrastructure without sufficient returns.
“There were concerns about market share losses on AWS, but that’s been put to bed now,” said Dan Morgan, portfolio manager at Synovus Trust, adding that the results showed AWS leadership remained intact.
Amazon also reported continued strength in its advertising business, with sales rising 26% year-on-year to US$19.8 billion as the company expanded marketing placements across its shopping platform and Prime Video.
