AWS just had its best cloud quarter in more than four years, and Amazon still says it doesn’t have enough cloud infrastructure to keep up.
Revenue at AWS jumped 37% year over year to $42.2 billion for the quarter ending June 30, beating the 31.21% growth analysts had expected and marking the cloud division‘s strongest performance in 18 quarters. CEO Andy Jassy didn’t mince words about it on the earnings call, calling AWS’s current cloud momentum a genuine boom. The unit added more than $4.6 billion in cloud revenue compared to the previous quarter alone, roughly 80% larger than any quarterly jump AWS had posted before.
Despite that growth, Amazon raised its 2026 capital spending forecast from around $200 billion to $220 billion, directing most of that toward cloud data centers and AI infrastructure, and Jassy said even that increase will not cover all the cloud demand the company expects this year. He added that the same cloud capacity crunch will likely stretch into 2027, with customers already locking up the bulk of AWS’s planned 2027 cloud capacity, and some already staking a claim on 2028 slots. AWS‘s cloud backlog reflects that pressure clearly, climbing to $496 billion by quarter’s end, up from $364 billion just three months earlier.
Memory costs sit at the heart of the higher spending forecast, which Jassy identified as the main reason behind the roughly $20 billion increase. Amazon did not specify whether that mostly covers high-bandwidth memory powering AI accelerators or standard server memory, but either way, the added cost does not buy proportionally more cloud capacity that customers can actually put to use.
There’s a structural reason the spending increase can’t instantly fix the shortage, too. Jassy explained that Amazon typically starts building cloud data centers about two years before they open, meaning today’s spending won’t show up as usable cloud capacity for a while yet. That timing gap also explains why Amazon’s free cash flow swung negative, a $7.6 billion outflow over the trailing 12 months compared to an $18.2 billion inflow the year before, even as operating cash flow actually rose 33% to $161.4 billion.
Still, the underlying cloud business looks healthy by most measures. AWS operating income climbed to $16.6 billion from $10.2 billion a year earlier, a 39% operating margin, and Amazon said its AI and semiconductor businesses have each individually crossed a $25 billion annualized revenue run rate. Jassy also noted that AI adoption is boosting demand for AWS’s core cloud services too, like standard computing, storage, and databases, not just the AI-specific cloud offerings getting most of the attention.
