ii view: Amazon's AWS cloud unit grows fastest since 2021
Now very much more than an online retailer. Analyst Keith Bowman assesses prospects.
31st July 2026 15:36
by Keith Bowman from interactive investor
Second-quarter results to 30 June
- Net sales up by 20% to $200.6 billion (£150.5 billion)
- Adjusted earnings per share of $5.75, up from $1.68 per share
Guidance:
- Expects Q3 sales of $197-202 billion or growth of 9-12%
- Expects Q3 operating income or profits of $22.5-26.5 billion versus $17.4 billion in Q3 2025
Chief executive Andy Jassy said:
“There’s a lot to be excited about, and we have much more coming for customers in the second half of the year and beyond.”
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ii round-up:
Amazon.com Inc (NASDAQ:AMZN) has detailed the fastest growth at its cloud data AWS (Amazon Web Services) business in 18 quarters, pushing group-wide sales ahead of Wall Street forecasts.
Second-quarter sales soared by a fifth from a year ago to $200.6 billion, aided by year-over-year growth of 37% at AWS to $42.2 billion. Analysts had expected sales of $196.5 billion, with 31% growth from AWS.
Shares in the Dow Jones and Nasdaq 100 company surged 15% having come into these results up by 2% so far in 2026. That compares to losses for fellow Mag Seven companies Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc Class A (NASDAQ:META) and Tesla Inc (NASDAQ:TSLA). Apple Inc (NASDAQ:AAPL) is up by almost a quarter year-to-date. The Nasdaq 100 and Dow indices have gained 11% and 8% respectively.
Alongside its US and International retailing businesses, AWS provides an expanding number of data centres which are increasingly hosting AI software for companies such as banks.
Like Google owner Alphabet recently, Amazon raised its expected annual capital expenditure forecast. Rising memory chip prices now see it looking to invest $220 billion in 2026, up from a previous $200 billion estimate.
Amazon investments last year included an $11 billion AI data centre called project Rainier, built exclusively to run workloads for Anthropic, a US AI software developer.
Amazon predicts current third quarter sales of between $197-and-$202 billion or growth of 9% to 12%. That’s expected to fuel Q3 profits of between $22.5 billion and $26.5 billion, a potential gain from last year’s $17.4 billion.
Broker Morgan Stanley reiterated its ‘overweight’ stance on Amazon shares post the results, again flagging the company as a ‘top pick.’
ii view:
Started by Jeff Bezos in 1994, Amazon is today headed by former AWS boss Andy Jassy. AWS generated most profits during this latest quarter at 61%. That’s up from 50% in Q4 2025. North American retail profits came next at 33% with International retail the balance of 6%.
For investors, returns on a proposed investment of $220 billion this year are not guaranteed, with intense competition in the cloud data sector also coming from other major players such as International Business Machines Corp (NYSE:IBM) and Oracle Corp (NYSE:ORCL). Unfinished trade talks between the US and China could yet see Trump tariffs raise the cost of goods imported from China. Government concerns regarding big-tech dominance have not gone away, while heightened energy prices due to the war in the Middle East are now pressuring inflation, potentially leaving interest rates higher for longer and dampening consumer demand.
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More favourably, Amazon’s track record for generating positive returns on investments is considered a good one, with early aggressive investment potentially boosting longer-term profits. Management’s focus on costs has previously included job losses, mainly across the retailing businesses. A diversity of business type and geographical locations exists, while brands such as Nike are looking to use Amazon as an alternative online store to their own website offering.
On balance, and while risks remain, accelerating growth at AWS and a consensus analyst fair value estimate above $300 per share give grounds for continued optimism.
Positives
- Dominant position in online retailing
- Pushing AI initiatives and investments
Negatives
- Government concerns for monopolistic powers
- Currency movements can hinder performance
The average rating of stock market analysts:
Buy
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