Foreign media commentators noted that Amazon's latest financial report once again demonstrates that the capital market is not averse to high investments in AI, provided the company already has stable revenue to cover these expenditures. For investors, cloud services remain the easiest link in the current AI industry chain to validate.
Amazon's second-quarter revenue beat expectations, with AWS performing particularly well, driving a significant rise in its stock price in after-hours trading. The article argues that the market is not only focused on the growth itself, but also on the company's ability to expand its data center investment while continuing to deliver substantial cloud revenue.
AWS revenue supports high investment
Amazon's property and equipment spending rose to $173 billion in the fiscal year ending June 30, up from $107.65 billion in the previous year. This type of spending covers infrastructure projects such as GPUs, natural gas turbines, and land.
The company also raised its 2026 capital expenditure forecast from $200 billion to $220 billion. Meanwhile, Amazon's cash reserves decreased by $7.6 billion compared to 12 months ago, and it experienced its first negative free cash flow this year.
Logically, rapid increases in spending often dampen market sentiment. However, the article points out that AWS's revenue grew 37% year-over-year to $42 billion in the quarter, making investors more willing to accept significant upfront investments. This is because data centers typically require a long period from groundbreaking to reaching marketable capacity, while current demand continues to grow in tandem.
AI deployment is not just about data centers
The article mentions that Amazon's AI strategy is not limited to building large data centers. The company is also continuously betting on developing its own chips, including Trainium and the Graviton processor based on the Arm architecture.
This investment may not be fully reflected in the capital expenditure figures, but it could improve AWS's profit margins. Amazon CEO Andy Jassy stated in the earnings call that AWS and Amazon Bedrock can build successful businesses even without their own cutting-edge models because the market is not dominated by a single model.
The market has more trust in cloud vendors' cash flow.
The article argues that this pricing logic is not unique to Amazon. Microsoft and Google also saw their stock prices boost after disclosing strong cloud revenue. In contrast, companies like Meta, with high capital expenditures but unclear revenue streams, still face stronger scrutiny.
The core assessment of the commentary is that investors currently view cloud-hosted platforms as a more stable part of the AI industry chain, while remaining cautious about the underlying economics of AI labs and startups. In other words, the market is willing to pay a premium for "AI infrastructure that is already profitable," but will not easily pay for unproven business models.
However, the article also cautions that cloud revenue essentially comes from other companies' AI spending. If large AI labs and their customers cannot sustain these costs in the future, the current revenue stability of cloud vendors will be affected. While cloud platforms are further removed from end-user demand, this does not mean they can completely isolate themselves from demand fluctuations.
