Amazon's CEO Andy Jassy said the company still struggles to keep up with demand for cloud and AI services, a sign that the tech giant's growth momentum shows no signs of slowing. Investors responded swiftly as Amazon’s stock surged by over 9% in after-hours trading after the company beat Wall Street expectations with its latest quarterly earnings.

Amazon closed the regular session at $235.50, up nearly 4%, but the real excitement came after hours when shares jumped to around $258. The company reported $200.61 billion in quarterly revenue, topping the $196.47 billion analysts anticipated. The crown jewel was Amazon Web Services (AWS), which posted $42.2 billion in revenue. That’s a 37% year-over-year increase, far surpassing the expected 31% growth and marking AWS’s fastest expansion since 2021. Advertising revenue also outperformed, reaching $19.81 billion against the forecasted $19.43 billion.

This surge in AWS revenue underlines how businesses are pouring money into cloud computing and AI infrastructure more aggressively than before. Despite the impressive results, Amazon warned that it expects to face capacity constraints through 2027 because demand continues to outstrip supply. The company has raised its capital expenditure forecast to about $220 billion for the year, up from $200 billion, with $54.2 billion spent just in the last quarter. These investments aim to expand data centers, servers, and AI chips but have also pressured cash flow, pushing the trailing 12-month free cash flow into negative territory by $7.6 billion.

Amazon’s third-quarter revenue guidance came in slightly below estimates, between $197 billion and $202 billion versus analysts’ $204.1 billion forecast. The company attributed some of this to moving Prime Day sales from July to June. Still, investors appear undeterred, focusing on the accelerating AWS growth and the strategic boost from AI. This follows a wider industry trend that includes moves like the EU’s push to build AI compute factories, emphasizing how cloud infrastructure is shaping the future of technology.

This article provides information only and is not financial advice.