Amazon's Spending Surge Puts Pressure on Free Cash Flow

Amazon (AMZN) stockholders who once bought shares for growth may now be questioning the cost of that expansion. During the company's July 30, 2026 earnings call, management revealed a significant increase in its spending plan for the year, raising questions about how different the company is today compared to when investors first bought in.

Amazon's capital spending has surged, reaching 22.3% of its revenue over the twelve months ending in fiscal Q2 2026, up from an average of 6.6% over the previous fourteen years. This spending totaled $173.0 billion over the last twelve months, exceeding the $161.4 billion generated by operations, resulting in a free cash flow outflow of $11.6 billion. Despite this, Amazon's operating margin improved to 12.1% over the last twelve months, compared to a historical average of 3.2%.

The spike in spending is primarily driven by investments in data centers for AI and AWS, Amazon's cloud business. Management noted that most of the 2026 capital spending supports these initiatives and raised the spending plan to about $220 billion from $200 billion, citing higher costs for memory chips. Demand for AWS remains strong, with revenue growing 36.7% in fiscal Q2 2026 and a backlog of $496 billion. However, Amazon's capacity is still insufficient to meet all demand.

For investors, the increased spending means less cash is returning to shareholders. Amazon has not repurchased shares or paid dividends over the last twelve months, and its diluted share count has slightly increased. The company has also taken on debt, with net debt reaching $100.2 billion at the end of the quarter. Management expects free cash flow to remain under pressure until the data centers come online and generate revenue.