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What's happened: Amazon (AMZN) stock soared 15% on Friday.
What's behind the move: The e-commerce and cloud giant topped second quarter expectations as accelerating cloud growth at Amazon Web Services (AWS) helped drive strong results. Amazon also said its AI and custom chip businesses have each surpassed a $25 billion annualized revenue run rate.
AWS generated $42.2 billion in second quarter revenue, up 36.7% year over year, fueled by strength across both its core cloud business and AI services.
"We added over $4.6 billion in revenue quarter over quarter — about 80% more than our largest increase ever. Our backlog stands at $496 billion, growing triple digits year over year," Amazon CEO Andy Jassy said during the company's earnings call.
"Customers choose AWS because we offer the broadest capabilities. They want their AI inference to reside near their other applications and data, and more of it resides in AWS than anywhere else," he added.
Amazon also said its custom chip business is growing at a triple-digit year-over-year rate.
What else you need to know: Heading into the earnings report, Wall Street was closely watching Amazon's cloud growth and capital expenditures on AI infrastructure.
The company said it plans to spend more on AI infrastructure, raising its capital expenditures to approximately $220 billion, up from its prior guidance of around $200 billion.
But Wall Street is willing to overlook the increased spending given AWS's accelerating growth and expanding operating margins.
"This was really a home run for Amazon," said Arun Sundaram, senior vice president at CFRA Research.
CEO Andy Jassy noted that demand for AI and cloud computing continues to outstrip server capacity, with 2027 planned expansion already largely booked into 2028.
"This growth rate justifies the spending," Sundaram said. "AWS is now running at about a $170 billion annual revenue run rate — that's more than four times larger than it was in 2019."
Amazon shares are up 17% year-to-date.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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