New Delhi [India], August 1 : Amazon has raised its capital expenditure (capex) guidance for FY26 to around USD 220 billion from about USD 200 billion earlier, as strong demand for its Amazon Web Services (AWS) cloud platform and artificial intelligence (AI) 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.