Amazon raises FY26 capex to about USD 220 bn as AI, AWS demand surges
New Delhi, August 1
Amazon has raised its capital expenditure guidance for FY26 to around USD 220 billion from about USD 200 billion earlier, as strong demand for its Amazon Web Services cloud platform and artificial intelligence services continues to drive investment, according to a Nuvama Research report.
"Management raised their FY26 capex guidance to ~USD220bn (from ~USD200bn earlier), due to high memory costs amid robust demand for AWS and AI services," Nuvama said in its Global Pulse sector update, citing Amazon's management commentary.
The report said Amazon posted stronger-than-expected second-quarter results, with revenue rising 19.6 per cent year-on-year to USD 200.6 billion, ahead of Street estimates of USD 197 billion. Operating income increased 43.2 per cent year-on-year to USD 27.5 billion, while operating margin improved to 13.7 per cent. Earnings per share of USD 5.75 also exceeded market expectations.
AWS remained the key growth driver during the quarter. According to the report, "AWS revenue accelerated 36.7% YoY, adding over USD4.6bn in Q2 to an annualised revenue run rate of more than USD169bn." It added that management highlighted a USD 496 billion backlog, which grew at a triple-digit rate year-on-year, while AI revenue and Amazon's in-house chip businesses, Graviton and Trainium, each crossed a USD 25 billion annual revenue run rate with triple-digit growth.
Nuvama said AWS revenue grew to USD 42.2 billion, driven by "strong AI demand, continued enterprise cloud migration, higher core cloud consumption along with increasing adoption of Trainium and Graviton chips and incremental capacity additions." Despite elevated AI investments, AWS operating margin expanded to 39.4 per cent, reflecting the business's strong profitability.
For the current quarter, Amazon has guided for net sales of USD 197-202 billion, implying year-on-year growth of 9-12 per cent, while operating income is expected to be between USD 22.5 billion and USD 26.5 billion, the report noted.
Looking ahead, Nuvama said Amazon's cloud business continues to benefit from rising AI adoption. "Strong Cloud growth demonstrates continued investment by enterprises on strategic initiatives. While the near-term environment remains laden with uncertainty for Indian IT companies--growth in the cloud business for Amazon (and peers) bodes well from a medium- to long-term perspective," the report said.
— ANI
Reader Comments
The backlog of USD 496 billion growing at triple-digit rate is mind-boggling. This is exactly why Indian cloud professionals should upskill in AWS and AI. The opportunity is massive, and companies like TCS, Infosys, and Wipro will eventually benefit from this cloud migration wave too.
Great news for the global tech ecosystem, but let's be honest - Indian IT is facing near-term uncertainty. The report even says so. However, this massive investment in cloud and AI will create ripple effects. Our startups and enterprises will eventually need these services, so long-term outlook is positive. 😊
I find it concerning that one company is spending more than India's entire defence budget on capex. This concentration of power in Big Tech is something we should watch carefully. That said, the AWS operating margin of 39.4% shows they know how to monetize this investment.
Graviton and Trainium chips crossing USD 25 billion annual run rate is massive. India needs to develop our own semiconductor and AI chip ecosystem. We can't just be consumers of this technology forever. Made in India chips for AI - that should be our next mission! 💪
The revenue growth of 19.6% YoY to USD 200.6 billion is impressive, but what stands out for me is the operating margin improvement to 13.7%. Amazon isn't just growing - they're growing profitably. Indian companies should study their efficiency model, especially in logistics and cloud delivery.
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