Andy Jassy said Amazon will spend $220 billion this year—and still won’t have enough capacity

The cloud unit posted $42.2 billion in revenue in Q2, up 37% from $30.9 billion a year ago, marking AWS’ fastest growth in 18 quarters, and what Amazon CEO Andy Jassy called its fifth consecutive quarter of accelerating growth. AWS added more than $4.6 billion in revenue quarter over quarter, and AWS operating income hit $16.6 billion, up 64% from $10.2 billion a year ago, on a 39.4% margin, up from 32.9% in the same period a year ago. AWS’s backlog—customer agreements representing future revenue—grew to $496 billion. 

“AWS is now a $169 billion dollar annualized revenue run rate business, which, for perspective, would place it 24th on the Fortune 500 list if it was a standalone company,” Jassy said during Thursday’s earnings call.

Across all of Amazon businesses including stores, advertising, Prime, devices, and cloud, net sales rose 20% to $200.6 billion, compared with $167.7 billion a year earlier. Operating income surged to $27.5 billion, from $19.2 billion. Net income hit $62.6 billion, or $5.75 per diluted share, compared with $18.2 billion, or $1.68 per share, a year ago—with a caveat that the net-income figure includes $53.4 billion in non-operating income primarily from Amazon’s investments in Anthropic. Advertising, one of the unsung heroes of Amazon’s business, grew 26% year-over-year, up from 22% growth a year ago when the segment hit $15.7 billion.  

Meanwhile, free cash flow, a metric that has caused some angst among investors as hyperscalers and cloud providers have committed to plowing more than $800 billion into building out data centers and AI infrastructure, flipped to negative $7.6 billion, compared with an inflow of $18.2 billion a year ago. The flip is driven by Amazon’s $66.1 billion year-over-year increase in equipment purchases, which Amazon said reflects AI investments. 

During the call, Jassy told investors that Amazon now expects to spend $220 billion in capital expenditures in 2026, up from its prior estimate of $200 billion, due to higher memory costs. Even at the elevated level, however, Jassy said Amazon still won’t “have enough capacity to meet all the demand we have in 2026. And I believe this dynamic will also be true in 2027 too.”

Undergirding much of the growth is AWS, which “is booming,” said Jassy in his remarks. 

The acceleration of AWS has been a steady build that began its most recent ascent in the third quarter of 2025 when growth hit 20% and accelerated each quarter until 37% in Q2. During the same span, AWS’ operating margins expanded from 32.9% a year ago to 39.4% while the company has been spending heavily on data center infrastructure. AWS property and equipment grew to $223 billion in Q1 up from $190 billion the quarter before. (Comparable Q2 figures haven’t been published yet.)

On Thursday’s call, Jassy said the growth acceleration is being driven by capacity additions plus other factors. Customers are gravitating toward AWS because it has “the broadest functionality across both cloud core and AI” and “the strongest operational performance and security.”

“As more and more companies are bringing their inference workloads to production, they want it to live near the rest of their workloads and data, and so much more of it lives in AWS than anywhere else,” said Jassy.

And as for Amazon’s core cloud business, which has seen its own boost from post-training reinforcement learning and agent tool use, Jassy noted that 85% of global IT spending is still on-premises. Meaning, plenty of companies are still running their own hardware in their own facilities. 

“That equation is going to flip in the next 10 to 20 years,” he said, adding that AWS is “winning the lion’s share” of enterprise cloud migration plans. 

Customer adoption of Bedrock—Amazon’s platform for accessing AI models from Anthropic, Meta, and OpenAI—has seen solid performance and customers spent more on the service in Q2 than in all prior quarters combined, an analyst noted on Thursday. Jassy’s view is that AWS and Amazon can “have a wildly successful business” without its own frontier model because there won’t be one model “to rule the world.”

“It’s not just Anthropic; it’s not just OpenAI,” Jassy said. “You see increasingly more and more companies being interested in the open models as well, and we have all of them in Bedrock.”

Meanwhile, AWS remains on pace to double its power capacity by the end of 2027, compared with 2025, Jassy said.