Amazon: AWS Booming and Accelerating

Today, AWS is showing acceleration in revenues that has not been seen before.

AWS revenue accelerated from 17% in the last year ago period to 37% year-over-year growth today.

I think this acceleration is evidence that we are starting to see the return on investment on AI infrastructure.

The acceleration was driven by both AI revenues and core workloads, while AWS chips business is also seeing very strong growth as Graviton revenue commitments increased more than 3x sequentially and Trainium secured multi-gigawatt commitments from Anthropic and OpenAI.

AWS reiterated demand exceeds capacity in 2026 and likely in 2027, as it is seeing most of its capacity in 2027 being sold out and even 2028 capacity is being sold today.

1. AWS’s booming acceleration

2. Visibility into demand

3. AWS custom chips business

4. ROI on capital expenditures

5. AWS margins

6. Resilient North American and International retail

7. Valuation

8. Conclusion

AWS delivered 37% year-over-year growth in 2Q26.

Last quarter, the market was impressed by AWS 28% year-over-year growth in 1Q26.

Bear in mind that this was a 4-percentage point acceleration from 4Q25’s 24%, and on top of 4Q25’s 4-percentage point acceleration from 3Q25’s 20%.

As such, AWS accelerated from 17% in 2Q25 to 37% in 2Q26, amounting to a total of 20-percentage point acceleration.

AWS revenue growth essentially more than doubled from the prior year.

This has significant implications for not just AWS but all other hyperscalers as it demonstrates that we are starting to see tangible return on investment on the huge capital expenditures that the hyperscalers are spending on AI infrastructure.

AWS achieving this is more significant as AWS is now a $169 billion annualized revenue run rate business today.

I think it is also worthwhile to highlight that we are seeing an acceleration in both AI and core cloud demand, as much of the focus tends to be on AI cloud demand.

Management shared that AI revenue reached $25 billion in ARR in 2Q26, up triple digits from the prior year.

This is also up from 1Q26’s $15 billion ARR, which means that we saw 67% sequential increase in AI revenue from the prior quarter.

Any concerns that we may not see an acceleration in AI revenue as a result of the heavy spending in AI infrastructure is starting to seem misplaced, in my view.

In addition, I think we should also appreciate that core AWS growth is also accelerating.

Core AWS growth accelerated to the low-to-mid-20s% year-over-year growth.

This suggests the highly complementary nature of AI and core cloud requirements.

As AI revenue accelerates, this is driving an acceleration in core revenue as post-training reinforcement learning and agent tool use is largely executed on CPUs rather than AI accelerators.

This plays to AWS hands because its Graviton chip is one of the strongest CPU chips, offering up to 30% to 40% better price performance than other options.

I think another positive thing for AWS is how far ahead it can see demand and revenues today.

AWS backlog or commitments reached $496 billion in 2Q26, up 154% from the prior year.

When I talked to management on a call after the earnings report, they provided more color on visibility.

On the call, management shared with me that the “lion’s share” of 2027 capacity has already been reserved and “quite a bit” of 2028 capacity is already reserved, both of which continued strong cloud growth for the next 2 years ahead at least.