Amazon shares surge as AWS growth eases AI spending worries

Amazon shares surged nearly 14% after Amazon Web Services delivered stronger-than-expected growth that eased Wall Street’s alarm over the cost of artificial intelligence. AWS revenue rose 37% to $42.2 billion in the quarter ended June 30, easily topping analysts’ expectation for 31.21% growth.

The results gave investors a fresh reason to back Amazon even as the company lifted its 2026 capital spending outlook to $220 billion. Amazon said AWS net sales were growing at their fastest pace in 18 quarters and translated that into a $169 billion annualized revenue run rate, a sign that customers are still paying heavily for cloud computing, storage and AI-related services. Amazon also reported second-quarter net sales of $200.6 billion, up 20% from a year earlier, and operating income of $27.5 billion, up 43%.

The stock reaction showed how sharply the market’s AI test has changed. Investors have been rewarding ambition less than proof, and Amazon’s numbers suggested the company’s core cloud franchise can still help fund the build-out of data centers, chips and networking gear. Higher memory costs were one factor behind the larger spending plan, but the stronger AWS growth gave management a firmer case that the investment is supported by demand.

That mattered beyond one earnings release. A July 22 analysis of the AI investment boom flagged pressure on Big Tech free cash flow as companies poured money into infrastructure without clear near-term payback. Amazon’s rally suggested investors were willing to look past the scale of the spending if the underlying business kept accelerating. Microsoft’s strong cloud growth one day earlier had already helped calm some of those fears, and Amazon’s numbers reinforced that message across the sector.

The shares also helped lift the Nasdaq on July 31, underscoring how closely the broader market is watching cloud revenue as a proxy for whether AI spending is justified. For Amazon, the combination of higher sales, stronger operating income and faster AWS growth strengthened the case that the company can keep spending heavily on AI while still showing the kind of business momentum investors now demand.