Amazon (AMZN Quick QuoteAMZN - Free Report) has pushed its 2026 capital expenditure forecast to roughly $220 billion, up from the $200 billion guided earlier in the year, with the increase tied primarily to higher memory and component costs and continued build-out of AI and cloud infrastructure. The revised outlook, disclosed alongside second-quarter 2026 results, underscores how central artificial intelligence has become to Amazon's growth story, even as the bill for that ambition keeps climbing.

The spending case is being backed by numbers that are hard to dismiss. AWS revenues rose 36.7% year over year in the second quarter to $42.2 billion, its fastest pace in 18 quarters and the fifth straight quarter of acceleration, pushing the segment to a $169 billion annualized run rate. AWS operating margin expanded to 39%, up roughly 650 basis points from a year earlier, suggesting that scale and efficiency gains are outpacing the cost of new capacity. The unit's backlog — customer commitments for future work — swelled to $496 billion, more than doubling over the past year and giving management visibility into demand well beyond this year's spending cycle. Company leadership has said capacity for 2027 is largely already spoken for, with some 2028 demand already committed, a sign that the infrastructure being funded now is not speculative.

Company-wide, the quarter reinforced the momentum: net sales climbed 20% to $200.6 billion, and operating income jumped 43% to $27.5 billion. Guidance for the third quarter calls for net sales of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion, with management attributing the sequential slowdown mainly to Prime Day timing shifts and currency effects rather than any softening in underlying demand.

Custom silicon adds another dimension to the wager. Amazon's in-house Trainium and Graviton chips have already crossed a $20 billion-plus annual run rate, and the newly ramped Trainium3 platform is central to expanding compute for AWS' largest AI customers. With demand still outstripping available capacity by the company's own account, the elevated spending looks less like a leap of faith and more like a calculated response to orders already on the books.

Rival Cloud Spending: Microsoft and Alphabet Keep Pace

Amazon's $220 billion capex plan puts it ahead of rivals Microsoft (MSFT Quick QuoteMSFT - Free Report) and Alphabet (GOOGL Quick QuoteGOOGL - Free Report) , though both are scaling aggressively too. Microsoft has guided calendar-year 2026 capital expenditure to roughly $190 billion, with Azure revenue growth around 40% and an approximate $80 billion backlog constrained more by power availability than demand. Alphabet has raised its 2026 capex guidance to $195-$205 billion, as Google Cloud revenues surged 82% year over year, its fastest growth among the three. While Amazon leads in absolute spending, Microsoft and Alphabet's combined outlays underscore that hyperscaler capital intensity is now an industry-wide, not company-specific, phenomenon.

AMZN’s Share Price Performance, Valuation & Estimates

Amazon shares have returned 37% in the past six-month period against the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s increase of 28.2% and 7.8%, respectively.

AMZN’s 6-Month Price Performance

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From a valuation standpoint, AMZN stock appears overvalued, trading at a forward 12-month price/earnings ratio of 23.63X, higher than the industry’s 23.5X. Amazon has a Value Score of D.

AMZN’s Valuation

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The Zacks Consensus Estimate for AMZN’s 2026 earnings is pegged at $13.06 per share, indicating a 82.15% increase from the figure reported in the year-ago quarter.

Amazon currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.