Amazon delivered a stronger-than-expected performance from its cloud computing business in the second quarter, with Amazon Web Services (AWS) recording its fastest revenue growth since 2021 as surging demand for artificial intelligence infrastructure continues to reshape the global cloud market.
The results reinforce the view that hyperscale cloud providers remain among the biggest beneficiaries of the AI boom, as enterprises increase spending on AI training, inference and cloud-based applications.
AWS generated $42.23 billion in revenue during the quarter ended June, comfortably ahead of analysts’ expectations of $40.54 billion, according to StreetAccount.
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Revenue rose nearly 37% year over year, a sharp acceleration from the 28% growth reported in the first quarter and the strongest expansion for AWS in almost five years.
AI Becomes A Major Growth Engine
Amazon said both AWS’ artificial intelligence business and its custom AI chips have each surpassed $25 billion in annualized revenue, more than doubling from a year earlier. The milestone illustrates how AI has evolved from an emerging opportunity into one of AWS’ largest growth drivers, as businesses increasingly deploy generative AI models and migrate AI workloads to the cloud.
The company continues to invest aggressively in proprietary silicon, including its Graviton processors and AI accelerators, to reduce reliance on third-party chips while improving performance and lowering operating costs for customers. Those investments are helping Amazon compete more effectively against rivals offering AI infrastructure built around chips from Nvidia and other suppliers.
The latest results come amid an increasingly competitive race among the world’s three largest cloud providers. AWS remains the industry’s largest cloud platform by revenue, with an annualized revenue run rate of approximately $148.4 billion.
That keeps it comfortably ahead of Microsoft, which reported on Wednesday that Azure and its broader cloud business generated more than $100 billion in revenue over the past year after cloud growth accelerated to 43%.
Meanwhile, Alphabet said last week that Google Cloud revenue surged 82% year over year to nearly $25 billion, lifting its annualized revenue to about $78 billion.
Although AWS remains the market leader, the faster growth rates reported by Microsoft and Google suggest competitors continue to gain traction as enterprises diversify cloud providers and expand AI deployments.
Following Alphabet’s earnings, Evercore analysts noted that Google’s rapid sequential revenue growth could eventually raise investor questions about cloud market share, although they maintained a positive rating on Amazon’s stock.
AWS Drives Amazon’s Profitability
Beyond its scale, AWS continues to be Amazon’s primary profit engine. The cloud division generated $16.62 billion in operating income during the quarter, significantly above analysts’ expectations of $13.62 billion.
AWS posted an operating margin of 36.8%, slightly ahead of Google Cloud’s 35.6% margin. The business accounted for nearly 61% of Amazon’s total operating profit, highlighting the extent to which the company’s earnings depend on cloud computing rather than its retail operations.
That profitability gives Amazon greater financial flexibility to fund massive investments in AI infrastructure while continuing to expand its e-commerce and logistics businesses.
Amazon significantly increased spending on infrastructure during the quarter as it races to meet growing demand for AI computing capacity. Capital expenditures rose 68% year over year to $54.21 billion, exceeding analysts’ expectations of $49.35 billion.
The spending reflects Amazon’s ongoing construction of data centers equipped with advanced AI chips, networking equipment, and power infrastructure needed to support complex AI models.
The elevated investment mirrors similar spending trends across the cloud industry. Microsoft recently reported quarterly capital expenditures of $41 billion, while Alphabet has also sharply increased investment in AI infrastructure, underscoring how hyperscalers are engaged in an unprecedented buildout of computing capacity.
Although the surge in capital spending has weighed on free cash flow across the sector, technology companies argue the investments are necessary to secure long-term leadership in artificial intelligence.
Amazon continued expanding AWS’ AI ecosystem during the quarter through new partnerships with leading AI developers. The company announced that AWS will begin hosting models from OpenAI, broadening the range of foundation models available through its cloud platform. Amazon also disclosed that Meta Platforms will deploy hundreds of thousands of AWS Graviton chips under a three-year agreement, providing another validation of Amazon’s custom silicon strategy.
These partnerships demonstrate that cloud providers are now competing not only on infrastructure capacity but also on the breadth of AI models, proprietary chips and software ecosystems they can offer enterprise customers.
AI Spending Shows No Signs of Slowing
Amazon’s results lend credence to the broader narrative emerging from recent earnings across the technology sector: enterprise demand for AI infrastructure remains exceptionally strong.
Despite investor concerns over the sustainability of AI-related capital spending, cloud providers continue to report accelerating revenue growth, expanding AI adoption and rising demand for computing capacity.
The quarter also highlights the increasingly central role of cloud computing in the AI economy. As companies build and deploy generative AI applications, demand for scalable computing power, specialized AI chips and cloud-hosted models continues to rise, benefiting hyperscalers with the financial resources to invest tens of billions of dollars in infrastructure.