Amazon Stock Soars After AWS-Led Q2 Beat: ETFs in Focus
On July 30, Amazon AMZN came out with second-quarter earnings of $1.88 per share, beating the Zacks Consensus Estimate of $1.83 per share and year-ago level of earnings of $1.68 per share. The company posted revenues of $200.61 billion, surpassing the Zacks Consensus Estimate of $197.11 billion and rising from $167.7 billion in the year-ago quarter.
Amazon's cloud segment grew 37% in the second quarter, outpacing analysts' expectations of 31% and marking its strongest expansion since 2021, as quoted on CNBC. AWS’ artificial intelligence (AI) business and the unit’s chips each generated over $25 billion in annualized revenue, more than doubling from last year (per CNBC). Shares surged 10.4% in after-hours trading on July 30.
Inside AWS Strength
AWS has brought in $16.62 billion in second-quarter operating income, well above StreetAccount’s $13.62 billion consensus, as quoted on CNBC. AWS reported a 36.8% operating margin in Q2, while one of its closest peers’ – Google Cloud’s – margin was 35.6%. Nearly 61% of Amazon’s total operating profit now comes from AWS.
Inside the Capex Boom
Like its peers, Amazon has been rapidly expanding AI-focused data centers to meet surging customer demand for AI computing. Second-quarter capital expenditures jumped 68% year over year to $54.21 billion, topping the StreetAccount consensus estimate of $49.35 billion, per the same CNBC source.
CEO Andy Jassy said the company expects capital spending to reach $220 billion this year due to higher memory costs. Jassy indicated that Amazon's heavy investment cycle is unlikely to slow anytime soon, as quoted on CNBC.
Jassy said Amazon still lacks enough capacity to meet all customer demand in 2026 despite its massive investments. He added that strong demand is expected to persist through 2027, with orders already lined up for 2028.
Aggressive investment spending pushed Amazon's free cash flow into negative territory. Over the trailing 12 months, the company reported a free cash outflow of $7.6 billion, compared with a free cash inflow of $18.2 billion in the same period a year earlier.
ETFs to Play
Amazon shares are up only 4% so far this year while they are off 1.2% over the past month. The latest earnings reignited optimism around the stock. Amazon stock has a Growth momentum of “B.” Amazon’s post-earnings share price rally and the Big Tech’s AI dreams put the below-mentioned exchange-traded funds (ETFs) in focus.
Global X PureCap MSCI Consumer Discretionary ETF GXPT – AMZN’s weight 38.73%
VanEck Consumer Discretionary TruSector ETF TRUD – weight 25.65%
ProShares Online Retail ETF ONLN – weight 22.66%
State Street Consumer Discretionary Select Sector SPDR ETF XLY – weight 22.45%
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This article originally published on Zacks Investment Research (zacks.com).
