Amazon Stock Surges 14% as AWS Growth Hits Four-Year High

This article first appeared on GuruFocus.

Amazon (NASDAQ:AMZN), a global e-commerce and cloud-computing company, surged approximately 14% in Friday's regular-session trading as of 10:19 a.m. ET after Amazon Web Services delivered its strongest growth in more than four years. AWS revenue increased 37% during the second quarter, strengthening investor confidence that Amazon's artificial-intelligence infrastructure investments are producing measurable demand. The rally placed the stock on course to add more than $340 billion in market value if the gain held.

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Amazon simultaneously raised its planned 2026 capital expenditure by 10% to approximately $220 billion from $200 billion. Chief Executive Andy Jassy said the spending supports existing demand rather than purely speculative future capacity. Most AWS capacity scheduled to become available during 2027, along with some planned for 2028, has already been reserved by customers. However, Amazon's trailing 12-month free cash flow moved to negative $7.6 billion from positive $18.2 billion one year earlier as infrastructure spending accelerated.

The free-cash-flow change represents a $25.8 billion deterioration, demonstrating the financial cost attached to Amazon's cloud expansion even as AWS growth improves. At least 15 brokerages raised their price targets following the results, suggesting analysts placed considerable weight on the acceleration in cloud revenue. Investors may now monitor whether AWS can maintain elevated growth while Amazon deploys the additional $20 billion of planned capital expenditure. Future cloud capacity utilization will be important because much of the financial return depends on converting reserved infrastructure into revenue without allowing spending to pressure cash generation indefinitely.

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