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Amazon will lift capital expenditure to $220bn this year with higher memory costs pushing up the cloud giant’s planned spending.
Andy Jassy, Amazon’s chief executive, told investors on Thursday that the group would raise guidance for the full year from $200bn.
The Amazon chief said that the spending was warranted as it did not have sufficient capacity to meet booming demand as sales at Amazon Web Services, its cloud division, rose 37 per cent year-on-year to $42.2bn, beating analysts’ expectations.
Cloud growth in the quarter was the group’s highest in more than four years, helping push shares up as much as 9 per cent higher in after-hours trading on Thursday.
Capital expenditure across the group climbed to $53bn in the quarter with the group’s free cash flow turning negative on a trailing 12-month basis to minus $7.6bn.
Operating income for the group, which spans advertising, ecommerce and media, climbed 43 per cent to $27.5bn.
“AWS is booming, growing 36.7 per cent year-over-year in Q2 — our fastest growth in 18 quarters,” Amazon chief executive Andy Jassy told investors ahead of the group’s earnings call.
Amazon is pushing to aggressively grow AWS amid pressure from rivals including Google, whose cloud unit grew 82 per cent year-over-year to $24.8bn in the second quarter. Amazon is seeking to compete at the forefront of AI and maintain its leading position in the cloud market.
The company has undertaken sweeping lay-offs in an attempt to reduce costs and help finance its vast AI investment.
Jassy said Amazon’s AI business and its chips unit had each reached an annual run rate for revenue of $25bn.
Amazon has committed to invest up to $75bn in start-ups Anthropic and OpenAI this past year as it backs multiple leading AI labs in an attempt to drive sales of its Trainium chips and ensure the two companies’ models are available for its cloud customers.
In March it set out to raise about $50bn through corporate bond issuances, upsizing the offering from $37bn following strong demand. But it faced weakening interest in long-dated debt when it sold $25bn in bonds earlier this month, with investors demanding wider spreads.
