Investors love AI, as long as you’re a cloud host

Amazon beat Q2 expectations as net sales rose 20% and AWS revenue climbed 37% year over year to $42 billion. Investors sent shares up nearly 10% after hours despite Amazon’s sharply higher infrastructure spending and first period of negative free cash flow this year.

The reaction shows investors are more willing to reward heavy AI infrastructure spending when it is tied to a fast-growing cloud business. Amazon’s bets on custom chips like Trainium and Graviton could also help defend margins as data center costs keep rising.