Is Amazon a Buy After Its Latest Earnings Report?

Amazon shares jumped 8% in after-hours trading following second-quarter earnings that beat on multiple fronts. AWS delivered 36.7% year-over-year growth, its fastest quarterly expansion in more than four years, while both AI services and custom chip businesses reached $25 billion annual run rates.

Net income swelled on a $53.4 billion gain from Amazon's investment in Anthropic, the AI startup competing directly with OpenAI. The cloud unit's acceleration signals enterprises are moving AI workloads into production after months of pilot programs.

The rally came despite cash flow headwinds. Amazon posted negative free cash flow of $7.6 billion in the quarter as capital expenditures continue climbing toward a projected $200 billion spend cycle. Management is betting that infrastructure investments today will capture the bulk of cloud AI demand through 2025 and beyond.

The after-hours move added roughly $150 billion to Amazon's market cap, pushing the stock closer to its 2021 highs. AWS growth had decelerated through 2023 as clients optimized cloud bills; the reacceleration suggests that cost-cutting phase has ended.