Amazon Cloud Sales Growth Eases AI Spending Concerns
Amazon's stock price surged nearly 14% on Friday after the tech giant reported its strongest cloud sales growth in over four years, easing concerns about its massive AI investments. The e-commerce and cloud titan posted a 37% jump in second-quarter cloud revenue, which could add more than $340 billion to its market value if sustained.
The company's results are seen as a resounding sign that some of Big Tech's AI investments are generating measurable returns. Amazon's cloud unit, AWS, drove the growth, with customers already reserving capacity for 2027 and some for 2028.
However, investors' tolerance for ever-increasing AI spending by Big Tech is growing thin. Meta and Google-parent Alphabet both slumped 7% despite strong revenue growth, after raising their capital spending forecasts while free cash flows cratered.
Amazon's approach to spending has been characterized as 'methodical and responsible' by Chris Ballard, managing partner at Check Capital, who notes that the company is only pouring money into serving demand that already exists. At least 15 brokerages raised their price targets on Amazon stock following the results.