CEO Andy Jassy Just Delivered Tremendous News to Amazon Investors
Bram Berkowitz, The Motley Fool
Fri, July 31, 2026 at 7:10 PM GMT+3 4 min read
Heading into Amazon's (NASDAQ:AMZN) second-quarter earnings print, the stock had struggled to overcome fears of overinvestment in artificial intelligence and deteriorating free cash flow (FCF).
But it turns out the market is willing to reward companies that take big bets, as long as there is evidence of big returns.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Amazon reported blowout second-quarter earnings results, crushing Wall Street consensus estimates for earnings and revenue, even as it raised its full-year capital expenditure guidance.
Revenue of roughly $200.6 billion beat estimates by over $4 billion and rose nearly 20% year over year. Operating income surged over 43%. Earnings came in particularly high, due to a pre-tax gain of over $53 billion, largely from Amazon's stake in Anthropic.
Amazon stock had surged roughly 13.4%, as of 11:48 a.m. ET today, not only due to the results, but also because Amazon CEO Andy Jassy delivered tremendous news to shareholders.
Image source: Amazon.com.
Demand is off the charts
Amazon is planning to spend more than any other hyperscaler on AI infrastructure this year. As a result, the company's capex guidance has spooked investors.
Amazon had guided for $200 billion in capex in 2026, and Jassy just raised that guidance to $220 billion, largely due to surging memory prices.
Amazon is feeling the impact of this level of investment. FCF turned negative in the quarter to the tune of roughly $7.6 billion.
But the results have also started to show up, particularly in Amazon Web Services (AWS), the company's cloud division, which also provides compute for AI.
AWS revenue of $42.2 billion in the quarter beat estimates by roughly $1.7 billion, increasing 37% year over year. In fact, that's the fastest quarter of AWS growth in 18 quarters when AWS revenue was less than half of what it currently is.
It's this aspect of the business where Jassy delivered tremendous news to shareholders.
"Even at that [capex] amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too. In fact, the demand we already have for 2028 is striking. Remember, enterprises are still very early in using inference at scale in their current production applications," Jassy said on the company's earnings call.
Jassy believes the company is well-positioned to generate strong returns
Jassy remains optimistic about the returns on invested capital (ROIC) the company can generate after the heavy upfront investments.
Jassy explained that there are two major parts of its large AI investment: data centers and the servers and networking equipment that go into the data centers.
Data center investments are made two years before the servers go in, and therefore before the data centers can be monetized. Once the data centers open, Amazon will generate significant revenue for over 30 years without another major upfront investment, according to Jassy.
Servers and networking equipment, though, run on a shorter cycle. Jassy said this equipment is purchased only a few months before being put to use. The break-even on this investment is under three years, while most AI capacity is being contracted on five-year contracts, he said.
Therefore, there is significant FCF generation in the two to three years after break-even, and AWS has a strong track record of pulling this forward, Jassy added.
Now, I think the bears would dispute some of Jassy's assumptions about long-term AI compute demand and the useful life of some of this equipment.
It's hard to know how everything will play out, but I think Amazon is a better bet on AI than many other companies because of its track record, the diversity of its businesses, and earnings multiples that remain fairly close to historical averages.
Should you buy stock in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $394,601!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,197,093!*
That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul.
*Stock Advisor returns as of July 31, 2026.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
CEO Andy Jassy Just Delivered Tremendous News to Amazon Investors was originally published by The Motley Fool
Yorumlar (0)
Giriş yaparak yorum yazabilirsin.
İlk yorumu sen yaz.