Amazon’s stock jumped nearly 9% after hours as the company reported a sharp rise in profits fueled by rapid growth in its cloud computing and advertising businesses. The tech giant’s quarterly sales hit $200.6 billion, a 20% increase over the previous year. Meanwhile, operating income surged 43% to $27.5 billion, driven mainly by Amazon Web Services (AWS) and advertising.

Cloud Business Powers Earnings Beat

AWS revenue climbed 37% to $42.2 billion, exceeding analyst estimates by about $1.7 billion and marking the fastest growth pace in 18 quarters. Operating income in the cloud division jumped 64% to $16.6 billion, pushing AWS’s operating margin to nearly 40%. Though AWS made up roughly 21% of Amazon’s total revenue, it generated over 60% of the operating income.

The company highlighted its AWS artificial intelligence and custom chip units, each surpassing $25 billion in annual revenue run rates with triple-digit growth. Contracts with AI firms Anthropic and OpenAI for Trainium chips, as well as increased adoption by platforms like Uber and Pinterest, shows this momentum. This growth ties into ongoing AI industry developments and infrastructure investments, which also pushed Amazon’s capital expenditures higher.

Advertising and Retail Also Climb

Advertising revenue grew 26% to $19.8 billion, reflecting strong demand for Amazon’s ad platform, while online store sales increased 15% to $70.4 billion. Third-party seller services revenue rose 16% to $46.8 billion. Net income skyrocketed to $62.6 billion, boosted by a $53.4 billion non-operating gain from Amazon’s stake in Anthropic, but the company’s core business showed solid underlying growth.

Amazon’s free cash flow shifted negatively to an outflow of $7.6 billion, mainly due to a $66.1 billion surge in infrastructure investments tied to AI. The company forecasts third-quarter revenue of $197 billion to $202 billion, aiming for 9% to 12% growth, with operating income expected between $22.5 billion and $27 billion.

This material is for informational purposes only and does not constitute financial advice.