Amazon (NASDAQ: AMZN) is exploding higher on earnings. In fact, shortly after its report last night, the stock rocketed more than $20 higher and could push even higher today. Most of that was thanks to the company’s Amazon Web Services (AWS), which brought in $42.2 billion in revenue during the quarter.
That was a 37% increase from the same time last year, making it the fastest growth the business has seen in more than four years. The strong results helped AMZN beat Wall Street’s expectations and sent the company’s stock higher after the earnings report.
AI Is Driving Growth
The biggest reason behind AWS’s rapid growth is artificial intelligence.
Companies are spending billions of dollars to build AI systems, train large language models, and run AI-powered applications. All of that work requires powerful data centers filled with advanced computer chips.
Amazon CEO Andy Jassy said customer demand for AI remains extremely strong. He also said Amazon still cannot build new capacity fast enough to meet all of the demand.
According to the company, AWS, Amazon’s custom AI chips, and several AI services have each grown into businesses with annual revenue run rates above $25 billion. The company also said much of its cloud capacity for 2027 is already spoken for by customers.
Amazon Keeps Spending
To keep up with demand, Amazon plans to spend even more money on new technology.
The company increased its expected capital spending for 2026 to about $220 billion, up from an earlier forecast of around $200 billion. Most of that money will go toward building new data centers and buying equipment needed for AI computing.
Although spending this much money is expensive, the company believes the investments will help it grow for many years. Company leaders say demand for cloud computing and AI is likely to remain strong well into the future.
More Than Just Cloud Computing
AWS was the biggest story, but AMZN’s other businesses also performed well. The company reported total revenue of $200.6 billion, the first time Amazon has ever generated more than $200 billion in sales during a single quarter.
Advertising continued to grow quickly as more businesses paid to promote products on Amazon’s websites. The company’s retail operations also benefited from strong customer demand and faster deliveries.
Amazon has continued expanding services like same-day and even 30-minute delivery in some locations, making online shopping even more convenient for customers.
There was a hiccup in the report, though.
Despite the strong earnings, one financial measure moved in the opposite direction.
AMZN reported negative free cash flow, meaning the company spent more cash than it generated during the past year. However, executives said this was mainly because of massive investments in AI infrastructure, including new data centers and equipment. Investors appeared comfortable with that explanation because they see the spending as an investment in future growth rather than a warning sign.
At the same time, the company is competing closely with Microsoft and Google in the race to provide cloud services for AI. All three companies are investing heavily in data centers and advanced chips. Businesses building AI applications need reliable cloud providers with enormous computing power, and demand continues to grow.
For Amazon, that trend is creating a major opportunity. If companies continue adopting AI at today’s pace, AWS could remain one of the fastest-growing and most profitable parts of the business. The latest earnings report shows that Amazon is betting big on the future of AI—and, at least for now, that strategy appears to be working.
