Amazon shares surged as much as 14% Friday, putting the stock on track for its best day in 11 years, after the company reported second-quarter results that showed revenue topping $200 billion for the first time and cloud growth easing fears about its ballooning AI spending.
The e-commerce and cloud giant’s revenue rose about 20% year over year in the quarter, while operating income jumped 43% to $27.5 billion, according to the report. Amazon Web Services, the company’s cloud unit, delivered the standout performance, with analysts pointing to surging enterprise AI demand as the driver of accelerating growth.
Chief Executive Andy Jassy provided granular detail on the company’s capital spending, giving investors a “line of sight” to returns through 2028 and defending the massive capex cycle, according to CNBC. Amazon raised its 2026 capital spending plan to about $220 billion, with higher memory costs among the drivers of the increase.
The reaction marks a sharp reversal from the selloff that hit megacap tech earlier in the week. Investors had punished Meta Platforms and Microsoft over AI spending concerns, and Apple fell about 9% on Friday over memory costs and softer guidance. Amazon’s results were seen as validation that hyperscale AI investment can translate into revenue, shifting the narrative for the entire sector.
Wall Street responded by raising price targets. Several firms reiterated buy ratings on the stock, with AWS outperformance giving analysts confidence in Amazon’s AI strategy, according to CNBC. The strong reception suggests investors are now rewarding companies that can show returns on AI infrastructure rather than simply committing to ever-larger budgets.
Memory costs and AI infrastructure demand have become the dominant themes of this earnings season. Amazon’s capex increase came partly from higher memory prices, echoing Apple’s warning that memory costs keep climbing. Amazon’s results suggest the AI buildout is translating into cloud revenue faster than many investors feared.
The rally also stood out against a mixed session for megacap tech, with Apple sliding and chipmakers such as Micron under pressure after Apple Chief Executive Tim Cook said he wants more memory suppliers. Amazon’s jump helped narrow the gap between its valuation and those of its megacap peers after months of underperformance.
For investors, the question is whether the momentum holds. Analysts note that Amazon’s cloud acceleration gives it one of the clearest AI revenue stories among the megacaps, but the company’s own guidance still assumes heavy spending through 2027 and beyond. If memory prices keep rising, the cost side of that equation will be tested in coming quarters.
Sources: MarketWatch, CNBC, CNBC on AWS outperformance
Author: Finance Desk
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