Amazon CEO Andy Jassy gave investors an unusually frank detail on July 30.
“Data center capital is spent starting two years before we can put servers into them to start monetizing,” he said on the company’s second quarter earnings call. In plain terms, when Amazon builds a data center, the money goes out two years before any money comes in.
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And the company is building a lot of data centers. Amazon spent $53.1 billion on capital projects in the quarter alone, and Jassy said it now expects to spend about $220 billion for the full year, up from the roughly $200 billion it projected earlier. He blamed higher memory prices.
You can own a piece of Amazon without ever having chosen it. Vanguard’s latest How America Saves report, which covers nearly five million workers, found 61% of participants hold their whole balance in a single target-date fund — the all-in-one option that accounts for 98% of the defaulted plans assigned.
Those funds hold hundreds of U.S. stocks, and Amazon is among the five largest in the S&P 500. So if that’s where your 401(k) sits, some of this spending is being done with your money — on data centers Amazon spends two years building before they earn anything.
Where Amazon’s record profit came from
Amazon reported net sales of $200.6 billion for the quarter ended June 30, up 20% from a year earlier. Operating income came in at $27.5 billion, against $19.2 billion a year earlier. AWS, the company’s cloud division, grew 37% to $42.2 billion in sales — what Amazon called “its fastest growth in 18 quarters.”
One thing flattered those numbers, though. Net income of $62.6 billion included a $53.4 billion non-operating gain that Amazon said was “primarily from our investments in Anthropic,” the AI developer. Amazon hasn’t sold any of that stake, so none of the gain is money it can spend.
Jassy also said the AWS backlog — work customers have contracted for but that hasn’t started yet — reached $496 billion.
The stock jumped about 15% on July 31.
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Free cash flow turned negative, and the debt is climbing
Free cash flow is what’s left after a company covers its operating costs and its capital spending. It’s the money available to pay down debt or hand back to shareholders through dividends and buybacks.
Amazon’s free cash flow has been shrinking for six straight quarters, and this one tipped it negative. Measured over the trailing 12 months, it slid from $25.9 billion in early 2025 to an outflow of $7.6 billion for the period ended June 30. Amazon spent $66.1 billion more on property and equipment than it had a year earlier, an increase it said “primarily reflects investments in artificial intelligence.”
The gap is being filled with borrowed money. Amazon’s long-term debt nearly doubled in six months, from $65.6 billion at the end of December to $128.9 billion on June 30. Interest expense for the quarter more than doubled from a year earlier, to $1.3 billion.
Amazon has never paid a dividend, so no payout is at risk here. The cost shows up as interest, and as debt that has to be repaid later.
Jassy says the math works. “At this level of spend and higher, we have clear line of sight to strong financial returns,” he told analysts. Servers break even in “a little less than three years,” and the data centers run 30 years or more, so that startup cost gets paid once.
AWS is making money throughout, posting operating income of $16.6 billion on a 39% margin, up from 33% a year earlier, while Amazon’s operating cash flow rose 33% to $161.4 billion.
You’re also paying for the chip shortage at checkout.
Apple raised Mac and iPad prices in June, and warned on July 30 that rising memory costs would squeeze its margins. CEO Tim Cook said the company “reluctantly raised prices” because of what he called “a 100-year flood on memory pricing,” and expects to pay even more this quarter.
So what should you do?
For most people, probably nothing right now. Selling out of a broad index fund over one quarter of heavy spending would mean betting against a company that just grew sales 20% in a year.
It’s worth understanding what you own, though. Amazon’s own release calls Anthropic and OpenAI “the two leading AI labs in the world” and says both have committed to years of buying its chips. Anthropic is also the company whose rising valuation handed Amazon most of its profit this quarter. Neither lab has said it can cover those commitments from revenue alone.
Amazon did not immediately respond to a request for comment.
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This article originally appeared on Moneywise.com under the title: Amazon’s debt nearly doubled to $129 billion in 6 months as CEO Jassy defends $220 billion data center spending spree
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