Investors love AI, as long as you're a cloud host
Amazon isn't slowing down on data center spending - but investors don't seem to mind. Amazon reported better-than-expected second-quarter earnings on Thursday, and investors loved what they saw. Net sales rose 20%, and cloud revenue stood out as a particular bright spot.
Key Takeaways
- This combination of positive results was enough to send Amazon's stock up nearly 10% in after-hours trading.
Crucially, Amazon isn't slowing down on data center spending, despite the conventional wisdom that investors want companies to rein it in.
- 6 billion less cash than it had 12 months ago, marking its first period of negative free cash flow this year.
Under normal circumstances, ballooning expenses would be a tough pill for investors to swallow.
- Those projects don't show up in capex numbers, but they can meaningfully improve margins for the company's cloud business.
"We see the AI business following very much the same margin trajectory we saw in the core business before," Jassy said during the company's Q2 earnings call.
- But it's important not to miss the broader lesson about the AI economy.
Right now, investors are treating cloud hosts as the most reliable part of the AI stack, while remaining skeptical about the underlying economics for AI labs and AI startups.
- Cloud-hosting services like AWS may be a few steps removed from that demand problem, but that doesn't mean they're insulated from it.
Stats & Key Facts
- #Net sales rose 20%, and cloud revenue stood out as a particular bright spot.
- #This combination of positive results was enough to send Amazon's stock up nearly 10% in after-hours trading.
- #Amazon spent $173 billion for the fiscal year ended June 30 on property and equipment - a category that covers GPUs, natural gas turbines, and plots of land - up from $107.
- #65 billion from the year before.
This combination of positive results was enough to send Amazon's stock up nearly 10% in after-hours trading. Crucially, Amazon isn't slowing down on data center spending, despite the conventional wisdom that investors want companies to rein it in. One line item, in particular, illustrates Amazon's appetite for investing in infrastructure.
Amazon spent $173 billion for the fiscal year ended June 30 on property and equipment - a category that covers GPUs, natural gas turbines, and plots of land - up from $107. 65 billion from the year before. It also raised its 2026 capex forecast from $200 billion to $220 billion - even as it has begun dipping into its cash reserves to help cover the cost.
The company ended the quarter with $7. 6 billion less cash than it had 12 months ago, marking its first period of negative free cash flow this year. Under normal circumstances, ballooning expenses would be a tough pill for investors to swallow.
For more details please read the original article at TechCrunch AI.
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