Amazon.com Inc.’s cloud unit expanded sales and profit in the second quarter as cash capital expenditures climbed, while trailing free cash flow turned negative ahead of the company’s next earnings report.
Amazon Web Services (AWS) sales rose 37% year over year to $42.232 billion, after 28% growth in the first quarter. Operating income increased to $16.621 billion from $10.160 billion a year earlier, and the segment’s operating margin rose to 39.4% from 32.9%.
Amazon’s companywide cash capital expenditures totaled $53.1 billion in the second quarter, compared with $31.4 billion a year earlier. The company said spending primarily covered technology infrastructure, most of which supports AWS, and fulfillment capacity. Separately, free cash flow for the 12 months ended June 30 was an outflow of $7.604 billion, compared with an $18.184 billion inflow in the preceding 12-month period.
Amazon President and CEO Andy Jassy has said AWS typically pays for land, power, buildings and equipment six to 24 months before it can bill customers for the resulting capacity. The timing puts the upfront cash burden on Amazon, while customers gain access to capacity as it comes online.
Amazon’s filing also reported $551 million in unrealized gains on energy contracts that reduced technology and infrastructure expenses, primarily affecting AWS. It did not specify how much of the gain was attributable to the cloud segment.
Jassy said a substantial portion of AWS’s planned 2026 capital spending has customer commitments. Separately, he said Amazon expects much of its planned AWS spending to be monetized in 2027 and 2028. He has compared the current investment cycle with AWS’s first major growth wave, saying Amazon had “liked the results.”
Amazon shares closed at $262.63 on Oct. 20, below their record closing price of $284.02 on Aug. 3. The company forecast third-quarter sales of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion, both companywide ranges, and did not issue an AWS-specific forecast. Amazon’s third-quarter results call is scheduled for Oct. 29 at 5 p.m. ET.
