Amazon announced another remarkable quarter that surpassed 200 billion dollars for the first time in history and temporarily reversed the market mood for technology stocks. The online retailer said that net sales in the second quarter ended June 30 jumped 20 percent to 200.6 billion dollars, with the quarterly revenue exceeding the 200 billion dollar mark for the first time ever. Operating income soared 43 percent to 27.
5 billion dollars while Amazon Web Services reported 37 percent growth to 42.2 billion dollars, its fastest growth in eighteen quarters and an annual run rate of 169 billion dollars. The figures came after the closing bell and sent Amazon soaring in after-hours trading before pushing higher into Friday’s session. Chipmakers, which had been hammered earlier in the week, also jumped back, aiding the broader indexes reclaim some lost ground.
Investors reacted to unequivocal proof that whacking on AI infrastructure costs is translating into a lift in cloud demand instead of just bloating bills. Chief executive Andy Jassy pointed to the momentum in a statement,. AWS is on fire, and AWS, the AI business, and the company’s own chips businesses are all at 25 billion dollars in annualized revenue run rate. Advertising revenue increased by 26 percent to 19.8 billion dollars, revealing ongoing strength outside of the company’s staple retail and cloud business. North American sales rose 16 percent and international sales increased 15 percent, indicating stable consumer demand as delivery times for Prime members reached new highs in the first part of the year. A sizable non-operating gain of 53.
4 billion dollars, mostly from the mark-to-market valuation of Amazon’s holdings in Anthropic, lifted reported net income to 62.6 billion dollars or 5.75 dollars per diluted share. Although that figure incorporates the revaluation of the investment, the so-called underlying operating performance still surprised to the upside and provided clearer guidance on profitability to markets.
The report was seen quite differently to the response other major tech companies elicited from investing in AI. Amazon’s rapid growth of cloud revenues, backlog of 496 billion dollars of AWS contracts and obvious returns on its silicon and AI investments confirmed to investors that the investments are creating tangible demand. While free cash flow was still negative on high capex, the street was more interested in the increase in revenue and improved margins in the cloud, which saw an operating income of 16.6 billion dollars at a 39.
4 percent margin. Forward guidance for the third quarter proved positive: net sales should range from 197 billion to 202 billion dollars. The company also indicated optimism about the mid-term outlook, hinting that demand for its AI-related services should outstrip capacity until 2027 to reinforce capital expenditure investment. This forward-looking optimism fueled an optimistic market sentiment to Amazon and to the semiconductor names supplying the on-going proliferation of infrastructure.
Market context was important. Before Amazon, technology stocks had been dragged down by worry over the size and returns achieved from AI investment. Amazon’s earnings, following positive developments from Microsoft and a rally in chip makers like Samsung and SK Hynix, changed this.
