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There’s no doubt about it: AI gave the big cloud firms a lift in business in the June quarter. We’ve already heard that from Google and Microsoft, and on Thursday, Amazon, the biggest cloud firm, followed suit by posting 37% growth in its Amazon Web Services cloud unit for the quarter. That’s 9 percentage points faster than it reported for the March quarter, and more than double the growth rate for the same period last year.
Just as strikingly, AWS’ operating profit margin also rose, to 39.4%, the highest since the start of last year. To lift its operating margin while grappling with rising depreciation expenses on new chips and servers is an accomplishment. Amazon stock jumped 9% in response, suggesting investors were more focused on AWS’ accelerating growth than on the huge capital investments it is making to drive future growth. As a reminder of the size of those investments, Amazon burned $7.6 billion in cash in the quarter and raised its 2026 capital expenditures projection by $20 billion to $220 billion.
The upbeat investor reaction was surprising given that Google stock sold off last week when the company detailed very similar capex plans and a similar rate of cash burn. Then again, AWS is a much bigger business—nearly $80 billion in revenue so far this year, compared with Google Cloud’s $45 billion. It’s hard for a big business to grow as fast as a small one, of course. It also may be that investors were simply in a better mood.
All the cloud firms are justifying their heavy capex spending by pointing to insatiable demand from customers for AI. Amazon CEO Andy Jassy arguably did a better job on Thursday night than others have done in outlining how the company could benefit from that demand. Jassy noted that AWS already had customers reserving computing capacity for 2028. He also explained that while it takes AWS three years to make back its investment on servers and networking technology, it can drive “significant free cash flow” on that hardware for at least two or three years, given the roughly five-year life of that equipment.
Most of Amazon’s AI capacity is contracted for five years, he said. Assuming demand holds up, AWS looks assured of reporting strong growth in the next few years. Questions about the long-term returns on big tech’s AI investment aren’t going away anytime soon. But Amazon, at least, is offering specific enough expectations that it may have reassured some investors for the moment (more on Amazon’s results here).
Cook’s Excitement Meter
One of Apple’s outgoing CEO Tim Cook’s favorite phrases is that he “couldn’t be more excited” about something—typically a new product or a business opportunity such as AI.
Sure, by law, Silicon Valley executives have to claim to be “excited” about things every 10 minutes, and Cook complies with that requirement, but the fact that he maxes out on excitement at times, as his favorite phrase indicates, is notable. (Incoming CEO John Ternus said on the call he was “very excited” about everything that was going on in tech, so he met the standard.)
On Thursday, as Apple reported robust June-quarter numbers in what Cook said was his last earnings call, he used his favorite phrase a couple of times. But he varied it by also noting that he “couldn’t be more confident” in Ternus’ leadership and “couldn’t be happier” with the reaction to Apple’s new Siri AI service. At another point, he said he was “beyond excited” for Ternus to take the job, which is a new one! (For details of Apple’s earnings, see here.)
In Other News
• Ori Herrnstadt, an engineering veteran of both Apple and Google, joined AWS in May as vice president of compute AI services, an AWS spokesperson confirmed.
• OpenAI said it is cutting prices on two of its newest models weeks after their release, as AI companies respond to customer concerns about surging bills for their services.
• Situational Awareness, a $20 billion hedge fund started by former OpenAI employee Leopold Aschenbrenner, sold much of its public equity bet to Ken Griffin’s investment firm Citadel after suffering recent steep losses in its public AI stock portfolio, The Wall Street Journal reported Thursday.
• Coinbase reported that second-quarter revenue fell 19% to $1.2 billion from a year ago, the third consecutive quarterly decline. It will renew its revenue-sharing agreement with Circle on the same terms next month, said Coinbase CEO Brian Armstrong.
• Amazon Zoox won approval to put its cars into robotaxi service commercially. Zoox has been offering free rides in its steering wheel–free autonomous cabs in San Francisco and Las Vegas, but it hasn’t been able to charge for any services without federal approval.
Today on The Information’s TITV
Check out today’s episode of TITV in which we discuss the possibility of AWS, Google Cloud and Azure converging in size.
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