Amazon has officially become one of only four U.S. exchange-listed companies to reach a market capitalization of $3 trillion. The e-commerce giant hit an all-time high earlier this month, coming within "pocket change" of the milestone, and now stands at approximately $2.84 trillion, requiring a modest 5.5% increase to cross the $3 trillion mark. This achievement is largely attributed to the strong performance of Amazon Web Services (AWS), which accounts for over half of Amazon's operating profit.
AWS has shown remarkable growth, with revenue increasing by 37% to $42.2 billion in the second quarter, surpassing analyst expectations of a 31.21% rise. This represents AWS's fastest growth in 18 quarters. The company's focus on artificial intelligence (AI) infrastructure is a key driver, with CEO Andy Jassy highlighting that current demand for computing resources exceeds available capacity. Amazon has significantly boosted its capital expenditure forecast for the year by 10%, raising it to $220 billion, to meet this surging AI-related demand, despite a trailing 12-month free cash flow that deteriorated to a $7.6 billion burn from $18.2 billion a year earlier.
The robust demand for AWS services is further evidenced by its contract backlog, which expanded significantly from $364 billion in the prior quarter to $496 billion. AWS's operating margin also improved to 39.4%, contributing $16.6 billion to operating income, approximately 61% of Amazon's total operating profit. Jassy has indicated that nearly all AWS capacity for 2027 is booked, and some supply for 2028 is already reserved, underscoring the sustained customer commitment and the unit's vital role in Amazon's financial success and market valuation. Advertising sales also saw a 26% increase to $19.8 billion.
