Amazon Surpasses $200 Billion in Quarterly Revenue for the First Time as AWS Growth Accelerates

AWS Revenue Up 37%
Fastest Growth Rate Since 2021
Large-Scale Investments Drive Free Cash Flow Negative
After-Hours Stock Price Up 7%

Amazon, the world's largest e-commerce company, surpassed $200 billion in quarterly revenue for the first time in the second quarter, driven by rapid growth in its cloud business. Although the company's free cash flow swung into negative territory due to increased investments in artificial intelligence (AI) infrastructure, concerns over the payback period for such investments eased as its core profit source, Amazon Web Services (AWS), delivered accelerating growth for five consecutive quarters.

On July 30 (local time), Amazon announced that its revenue for the second quarter of this year reached $200.6 billion, marking a 20% increase year-on-year. This figure beat the $197 billion average analyst forecast compiled by Bloomberg.

AWS led the company’s performance. AWS revenue rose 37% from a year earlier to $42.2 billion, exceeding Bloomberg's consensus estimate of $40.6 billion. The growth rate accelerated for the fifth consecutive quarter, reaching its highest level since the fourth quarter of 2021.

While AWS accounts for roughly one-fifth of Amazon's total revenue, it generates the majority of the company's operating profit. As competitors like Microsoft and Google also reported strong cloud growth, Amazon’s better-than-expected results helped alleviate concerns that it could fall behind in the AI investment race.

Andy Jassy, Amazon’s Chief Executive Officer, stated that AWS is expanding rapidly, and that annualized revenue from both AI services and the company's own semiconductor business has each surpassed $25 billion. Both segments saw triple-digit growth compared to the previous year.

Amazon is cultivating new growth engines through its generative AI model platform Bedrock, proprietary AI chip Trainium, and server chip Graviton. During a post-earnings conference call, Jassy disclosed that AWS’s remaining deal balance—not yet recognized as revenue—has reached $496 billion.

$53 Billion Invested in AI... Negative Free Cash Flow

Investments in response to surging demand for AI and cloud computing also increased dramatically. Amazon spent over $53 billion on real estate and equipment in the second quarter. On a separate basis, capital expenditures totaled $54.2 billion, up approximately 69% from $32.1 billion in the same period last year.

As a result of this large-scale investment, free cash flow over the past 12 months turned negative, shifting from a net inflow of $18.2 billion a year ago to a net outflow of $7.6 billion. Amazon expects to invest about $200 billion this year in capital projects including AI data centers and semiconductors.

Sky Canaves, an analyst at Insider Intelligence (formerly eMarketer), commented that given spending trends so far, capital expenditures may exceed Amazon's original forecast this year. However, the sharp growth in AWS revenue and cost controls in other business units mean investors are unlikely to be overly concerned about this development.

Amazon's net profit for the second quarter soared to $62.6 billion—over three times the $18.2 billion recorded a year earlier—with earnings per share (EPS) reaching $5.75. However, the net profit figure includes a $53.4 billion pre-tax paper gain reflecting the increased valuation of AI startup Anthropic, in which Amazon is an investor.

E-commerce and advertising businesses also continued their growth trajectory. North American revenue climbed 16% to $116.2 billion, and advertising revenue increased 26% to $19.8 billion, surpassing market expectations.

However, Amazon’s outlook for the third quarter fell short of market expectations. The company projected third-quarter revenue of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion. According to Bloomberg's analyst consensus, forecasts were $203.9 billion for revenue and $25.1 billion for operating profit.

Amazon explained that the comparative base effect of moving its annual Prime Day sale from July last year to June this year would dampen third-quarter revenue growth. The company added that excluding the impact of the Prime Day timing shift, revenue growth for the third quarter would be roughly 4 percentage points higher.

Amazon's stock closed at $235.50 on the New York Stock Exchange that day, then rose about 7% in after-hours trading following the earnings announcement. The ongoing acceleration of AWS growth for five consecutive quarters bolstered investor sentiment, as massive AI investments appeared to translate directly into revenue increases.

This content was produced with the assistance of AI translation services.