Amazon’s AI Capex Is Paying Off and I’m Buying
Amazon is spending at a scale that makes most investors nervous, but the cash flow charts tell a story that has me adding to my position every quarter. Here is why I see a toll road being built while others…
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My Amazon (NASDAQ:AMZN | AMZN Price Prediction) position keeps growing for one reason. I can now watch its AI spending turn into revenue, one quarter after another. Amazon spent $131.8 billion on capex in 2025 and raised its 2026 tech and infrastructure outlook to approximately $220 billion. Plenty of investors wince at those figures. To me, Amazon is building toll roads that customers have already lined up to use.
AWS Growth Is Speeding Up Alongside the Spending
Put the two trends side by side and the case gets clear. Quarterly capex rose from $35.10B in Q3 2025 to $54.21B in Q2 2026. Over the same stretch, AWS growth went from 20% to 24% to 28% to 37%. That last figure was the fastest AWS growth in 18 quarters, on $42.23B of revenue at a 39.4% operating margin. Amazon’s AI and chips businesses each passed $25B in annualized revenue, and both are growing at triple-digit rates.
Signed Contracts Already Cover Future Capacity
My second reason is visibility. The AWS backlog reached $496 billion, and management said most of its 2027 capacity is already reserved. OpenAI committed to roughly 2 GW of Trainium capacity starting in 2027, and Anthropic plans to secure up to 5 GW. Servers take “a little less than three years to break even,” they last at least five to six years, and most AI capacity runs on contracts of at least five-year terms. The CEO now says AWS could “very possibly be a trillion dollar annual revenue business for us in time.”
Core Profits Keep Growing Under the Anthropic Gains
I set aside the Anthropic gains when I judge earnings. On a comparable basis, Q2 EPS came in near $1.88, ahead of the $1.83 estimate. Operating income rose 43.2% while revenue grew 19.6%, so margins are expanding. Advertising added $19.81B, up 26%. Q3 guidance calls for operating income of $22.5B to $26.5B, compared with $17.4B a year earlier.
Why My Money Goes Here Over Microsoft and Alphabet
Microsoft (NASDAQ:MSFT) grew Azure 43%, and I respect that. Its companywide revenue growth of 17.75% trails Amazon’s, though, and it trades at 8.66 times book value compared with Amazon’s 6.55. Alphabet (NASDAQ:GOOGL) looks cheaper at about 15 times earnings, compared with Amazon’s 35. But Alphabet raised $49.6 billion from selling new stock, paused its buyback, and saw long-term debt rise from $46.5 billion to $98.2 billion. Amazon pays for its expansion with net debt/EBITDA of 0.45 while covering interest 35.17x times over.
Cash Flow Risk Keeps Me Disciplined
Trailing free cash flow turned negative at -$7.6B, and 2025 free cash flow fell 66% to $11.19B. Memory chip supply swings, tariffs and a recession could all hurt returns on data centers that are already built. I take that seriously. Still, Q2 operating cash flow rose 39.6% to $45.39B, and customers reserve capacity before Amazon buys the servers. The CEO said the free cash flow squeeze lasts “until these data centers come online to be monetized.”
What Keeps Me Adding From Here
Amazon expects to have double the capacity, power capacity by the end of 2027 compared with 2025, and customers have already claimed much of it. The same data-center expansion is pulling in a whole host of power, cooling, and networking suppliers, which we profiled in a free report on seven AI infrastructure stocks that aren’t chipmakers. With backlog rising faster than capex, I will keep buying, because I would rather own the toll road than pay the toll.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
