Amazon Web Services closed the second quarter with a $496 billion backlog, a figure that would take nearly three years to work through at the unit's current run rate. The cloud division generated 60% of Amazon's operating income on just 21% of sales, and CEO Andy Jassy says the company won't be able to fulfill demand in 2026 or 2027.
AWS carries an outsized share of profit
Amazon's cloud unit remains the company's most important segment by far. During Q2, AWS generated 60% of Amazon's operating income while making up only 21% of its sales, underscoring a profit margin well above the rest of the business. Because of that gap, Amazon keeps directing its heaviest spending toward the division.
The company plans to spend $220 billion on capital expenditures this year, with nearly all of it going into data centers. Demand for cloud computing capacity keeps climbing, and Amazon has to keep building to meet it — yet it still can't build enough.
The backlog signals years of demand
At AWS's current run rate of $42.2 billion last quarter, working through the $496 billion backlog would take nearly 12 quarters, or about three years. During Amazon's conference call, CEO Andy Jassy said the company will not be able to fulfill demand in 2026, and expects the same in 2027. Amazon is already starting to see demand appear for 2028.
Amazon shares traded at $263.29, down 0.96% on the day, giving the company a market cap of $2.9 trillion. The stock has traded between $196.00 and $287.20 over the past 52 weeks.
An analyst sees a buying opportunity
Motley Fool analyst Keithen Drury argues Amazon is on a multi-year growth trajectory tied to the AWS backlog, and that its relatively low historical valuation makes now a good entry point. He says he'd remain a buyer of Amazon below $270 a share, and would still hold that view even if the stock traded at $300.
Source: The Motley Fool
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