Amazon's AI Bet Generates Revenue Growth, But FCF Conversion Lags
Amazon's massive investment in artificial intelligence (AI) infrastructure is generating strong revenue growth for its AWS cloud business, but the company's free cash flow (FCF) has swung negative due to heavy spending on new capacity.
In the second quarter of 2026, AWS reported its fastest growth in 18 quarters, with revenues jumping 37% year over year to $42.2 billion and segment operating income surging 64%. The AI services business has surpassed a $25 billion annualized revenue run rate, growing at triple-digit percentages year over year.
However, Amazon's TTM FCF conversion is -5.6%, meaning the company is absorbing the cost of capacity it's still building. Management has guided roughly $220 billion in cash capex for 2026, with long-term debt doubling to $128.9 billion in the first half of the year.
AWS' custom-chip business, comprising Trainium for AI training and inference and Graviton for general cloud computing, has also crossed a $25 billion run-rate threshold, growing at triple digits. The company's operating cash flow remains healthy, but the scale of new capex is pushing FCF into negative territory.