Amazon Earnings: AI Demand Drives Fastest AWS Growth in Three Years, but Heavy Spending Weighs on Cash Flow

The generative AI boom is driving corporate demand for cloud computing, GPUs and managed infrastructure, putting Amazon Web Services at the center of Amazon’s growth story and valuation. Building that capacity requires heavy upfront spending, but investors are increasingly willing to tolerate weaker near-term cash generation from companies positioned to host AI workloads at scale.

Amazon reported second-quarter 2026 revenue growth of 20%, taking sales above $200 billion. AWS revenue jumped 37% from a year earlier to $42 billion, its fastest expansion in 18 quarters. The company again raised its full-year capital spending outlook as it adds GPUs and data centers. Although the investment pushed free cash flow into negative territory, investors focused on the strength of cloud demand and Amazon’s potential AI returns.

Seattle-based Amazon is stepping up investment in artificial intelligence infrastructure, an increasingly capital-intensive race that requires spending on data centers, computing chips and networking capacity. The outlay is important to Amazon’s ability to support generative AI workloads and compete in cloud services, as the world’s largest technology companies commit growing sums to secure computing capacity and meet demand for AI products.

Amazon has raised its planned AI infrastructure spending for 2026 to $220 billion, up from the $200 billion estimate it issued in April. The $20 billion increase represents a 10% rise from its earlier forecast and signals a further acceleration in investment during the year. The revised plan underscores the scale of capital required as Amazon expands the infrastructure needed to handle rising AI computing demand.

Amazon Web Services, or AWS, is one of the world's leading cloud-computing platforms. Companies adopting generative AI rely on computing power, data storage and model services, making AI a new growth engine for the cloud market. Continued expansion at AWS would also directly affect Amazon's profit mix and intensify global competition for data-center investment.

Amazon CEO Andy Jassy now expects AI demand to help lift AWS annual revenue to $600 billion within the next 10 years, roughly twice the previous projection. AWS revenue rose 19% in 2025 to $128.7 billion, while its AI business reached $15 billion in annualized revenue, indicating that accelerating corporate AI spending is translating into demand for cloud services.