Amazon's AWS order backlog swelled to $496 billion, signaling that the cloud giant's AI bet is generating real revenue commitments from the world's largest technology buyers.
Back
Amazon AWS backlog hits $496 billion as AI demand surges
Amazon's AWS order backlog swelled to $496 billion, signaling that the cloud giant's AI bet is generating real revenue commitments from the world's largest technology buyers.
Amazon.com Inc.'s Amazon Web Services reported an order backlog of $496 billion, with Chief Executive Officer Andy Jassy citing strong growth across both AI and traditional cloud workloads as the company's massive capital spending program begins to show returns.
"AWS is booming, growing 36.7% year-over-year in Q2, and our AI and Chips businesses each eclipsed run rates of more than $25 billion," Jassy said in the earnings release.
AWS generated $42.2 billion in revenue during the second quarter, a 36.7% increase from a year earlier that marked the segment's fastest growth since 2021. Operating income jumped 64% to $16.6 billion, pushing the segment margin to 39.4% from 32.9%. Amazon overall posted net sales of $200.6 billion, up 20%, with operating income of $27.5 billion — a 43% gain that lifted the companywide margin to 13.7%.
The backlog figure — representing future revenue commitments under contract but not yet recognized — validates Amazon's decision to spend $54.2 billion on property and equipment in the quarter alone, with trailing 12-month capital expenditures reaching $169 billion. Free cash flow swung to negative $7.6 billion over that period, but operating cash flow of $161.4 billion, up 33%, suggests the spending is funding growth rather than masking weakness.
The $496 billion backlog dwarfs the $200 billion in annualized AWS revenue the company is currently running, implying multiple years of committed spending from enterprise and AI customers. Trainium, Amazon's in-house AI training chip, has secured landmark commitments from OpenAI at roughly 2 gigawatts of compute capacity and from Anthropic at up to 5 gigawatts, Jassy said. The custom silicon business has surpassed a $20 billion annual run rate and is growing at triple-digit percentages.
The acceleration comes as Amazon navigates a delicate balance between growth and profitability. AWS's 39.4% operating margin was its best in 15 quarters, showing the company can expand capacity without sacrificing pricing discipline. That outcome places Amazon closer to Microsoft Corp.'s Azure — which grew 43% in the same period — than to Meta Platforms Inc., where AI spending squeezed margins to 31% from 43%.
Wall Street has taken notice. Amazon shares closed the regular session at $235.50, up 3.9%, then surged to $256.33 in after-hours trading, an additional 8.85% gain. Of 66 analysts covering the stock, 62 rate it a Buy, with a consensus price target of $314.23 implying roughly 27% upside from current levels. The stock trades at 29 times forward earnings, below its historical premium, with an enterprise value-to-EBITDA multiple of 14.
The third-quarter guidance gave skeptics some ammunition. Amazon forecast sales between $197 billion and $202 billion, below the $204 billion analysts had expected. The company attributed nearly 400 basis points of the shortfall to the timing of Prime Day, which fell in the current quarter rather than the prior one.
For investors, the key question is whether the $169 billion in trailing capital expenditures will earn its cost of capital. The $496 billion backlog suggests customers are already committing to pay for that capacity. With Trainium3 nearly fully committed before its 2027 revenue ramp, Amazon's AI infrastructure bet appears to have cleared its first major validation hurdle.
This article is for informational purposes only and does not constitute investment advice.
