Amazon has agreed to acquire DuckLabs, the company behind DuckDB, the fast-growing open-source database that has become a favorite of developers looking to analyze large amounts of data without the cost and setup of a cloud data warehouse.

Employees of DuckLabs will join Amazon Web Services, including co-founders and DuckDB creators Hannes Mühleisen and Mark Raasveldt, who will continue leading the team and setting the project’s technical direction. They will remain based in Amsterdam, where the team will continue developing DuckDB and related projects.

Amazon says it is not acquiring the DuckDB open-source project itself. DuckDB will remain free and open source under the MIT license, overseen by the nonprofit DuckDB Foundation, as will the related DuckLake and Quack projects, according to DuckLabs.

Financial terms were not disclosed. Amazon said it has signed a definitive agreement and expects the acquisition to close shortly. DuckLabs said it expects to become part of AWS in early September.

Larger shifts in cloud data

The deal fits Amazon’s broader push to turn S3, its flagship cloud storage service, into a place where customers analyze data rather than just store it. It gives Amazon a team experienced in building fast, lightweight analytics software that runs directly against data sitting in cloud storage.

The move comes as the data industry shifts toward keeping information in open formats in cloud storage, where it can be queried directly rather than loaded into a separate warehouse.

The shift puts pressure on companies like Snowflake and Databricks, which sell the compute and governance layer on top of stored data. Both are major AWS partners as well as competitors, with large numbers of customers running on Amazon’s cloud.

AI has raised the stakes, driving up both the volume of data companies keep in the cloud and the cost of analyzing it. Amazon says DuckDB is a natural fit for AI agents, which query data much the way people do, poking and experimenting with small sets before deciding what they want.

“DuckDB ends up being naturally optimized for AI agents to use,” wrote Mai-Lan Tomsen Bukovec, the AWS VP who leads its cloud data services, in a post about the acquisition.

DuckLabs said it has worked closely with AWS in recent years, including on DuckDB support for Amazon’s S3 Tables and SageMaker Lakehouse.

“DuckDB is an incredible open source project with an amazing community; it is broadly used and very much loved by S3 customers today,” said Andy Warfield, an AWS vice president and distinguished engineer, in a press release announcing the deal.

‘That’s Amazon’s playbook’

One of the companies watching closely is in Seattle. MotherDuck, which sells a cloud service built on DuckDB, was founded in partnership with the DuckLabs team and has worked with it closely for four years. Three of its engineers are among the top 10 outside contributors to the DuckDB project.

In a blog post Wednesday, MotherDuck CEO Jordan Tigani said Amazon is following a familiar pattern. “That’s Amazon’s playbook, after all: wait until an open source project gets big enough, then launch it as a service,” wrote Tigani, who helped start Google’s BigQuery and spent a decade there before co-founding MotherDuck in 2022.

He expects Amazon to do exactly that with DuckDB: “After all, they’re not acquiring Duck Labs just because they love open source,” he wrote. “We welcome the competition.”

He said the deal is likely to be good for DuckDB, because Amazon has a financial reason to keep the project open and healthy. “If DuckDB becomes the standard, it is going to drive a lot more compute on their infrastructure, which is where they make their money,” he wrote.

Tigani said DuckLabs is being kept as a wholly owned subsidiary with its organization intact, and that the DuckDB Foundation has “iron clad control over the DuckDB IP.”

MotherDuck also said it is now offering enterprise support for DuckDB — which it had previously steered clear of to avoid competing with DuckLabs. Tigani said the company has Mühleisen and Raasveldt’s “explicit blessing” to take it on now that they are joining Amazon.

Five years, no venture capital

DuckLabs was founded a little more than five years ago as a long-term home for the DuckDB development team. The company turned down venture capital, stayed owned by its founders and employees, and grew to more than 30 people in Amsterdam, funding itself through support and feature-development contracts.

In a blog post, Mühleisen and Raasveldt wrote that they had come to worry DuckDB’s growth would outpace their ability to support it, and that their small company “could become a bottleneck for the project.” Building a larger sales and operations organization, they wrote, would have pulled the team away from the technical work that made DuckDB successful.

Nine days before the acquisition was announced, Mühleisen and Raasveldt published a preview of DuckDB 2.0, due this fall, declaring that the release “kicks off the year of DuckDB as a server.” It adds Quack, which lets one DuckDB instance serve data to others over a network, along with work aimed at speeding up queries against data held in object storage such as S3.

DuckLabs said the DuckDB Foundation will add a technical advisory board, giving leading community members input on the project’s technical direction. The company also plans to let DuckDB run extensions signed by outside developers and organizations.

BELLEVUE, Wash. — There is no prominent signage outside Anduril’s downtown Bellevue office. The name isn’t listed in the building directory, on the suite door, or in the lobby. That may be by design: Inside, Anduril engineers are quietly building AI-driven, autonomous technologies intended to keep the U.S. and its allies ahead in a rapidly changing military landscape.

Step through the front doors and it becomes clear that this is no ordinary tech company. 

Scattered across desks, production tables, conference rooms and showroom labs are autonomous drones ranging in size from a microwave to a ping-pong table, alongside next-generation digital night-vision goggles and military-grade edge computers designed to keep soldiers connected in an increasingly data-rich battlefield. 

The Costa Mesa, Calif.-based defense giant — which closed a $5 billion funding round at a $61 billion valuation earlier this year and is reportedly targeting a $100 billion valuation — is rapidly building a massive engineering footprint in the greater Seattle region. It includes modern offices in downtown Bellevue and Seattle, and a multi-acre military testing facility near Carnation, Wash.

GeekWire got a peek inside the iconoclastic company’s Seattle-area operations this week. We toured the Bellevue offices, demoed products, and sat down with senior vice president Tom Keane. The former Microsoft cloud executive leads Anduril’s local presence and oversees its connected warfare division, including mixed reality, AI and edge computing technologies.

Keane was clear about the company’s growth ambitions in the Seattle region: “I could absolutely see a world where we get to 1,000 people here in terms of engineers,” he said.

Asked when that milestone could be reached, Keane said, “It’s sort of almost as fast as you can hire people.” Realistically, that will likely occur over the next two years.

Anduril currently employs 560 people in its Bellevue and downtown Seattle offices, up from about 30 four years ago. That’s when Keane, who had interviewed with 62 companies looking for a new challenge in edge computing, joined Anduril because of what he called “world-class teams in every discipline.” 

With more than 110 open positions in Washington state and a newly leased third floor in downtown Seattle coming online, Keane said the regional expansion is only accelerating.

The regional workforce was until recently slated to include a maritime manufacturing hub along the Lake Washington Ship Canal in Seattle. However, as GeekWire reported this morning, Anduril has since vacated the former Foss Maritime shipyard space after the U.S. Navy canceled the autonomous warship program the company was pursuing.

But Anduril’s maritime ambitions haven’t gone away. Alongside its autonomous aircraft, low-cost cruise missiles and counter-drone interceptors, the company continues to develop a large subsea fleet, from modular survey vehicles to the extra-large, school-bus-sized Dive-XL.

The Big Tech pipeline meets ‘grit’

The company’s Seattle-area ramp-up is a play for the region’s engineering talent — a mix of disciplines well-suited to a next-generation defense hardware company, and one Keane says is hard to find in one place. That includes distributed systems engineers, AI and machine learning specialists, and advanced optics experts.

Another advantage: proximity to major military installations including Joint Base Lewis-McChord and Naval Base Kitsap.

Tech giants such as Microsoft, Amazon, Google and Meta have long dominated local engineering hiring. But Anduril is recruiting aggressively from those companies, pitching engineers who want to move fast and see their work in the field.

Deep pockets and close ties to the U.S. defense establishment don’t hurt, either.

Anduril got a large infusion of that talent 18 months ago, when it took over Microsoft’s IVAS (Integrated Visual Augmentation System) program along with about 100 local engineers who had spent years developing augmented reality hardware for the U.S. Army.

“If you take machine learning and AI… you can look out any of these windows and see places that we can recruit from,” Keane said from a conference room overlooking downtown Bellevue. “For a lot of software engineers, this is incredibly applied.”

Keane acknowledges the company’s culture isn’t for everyone. In fact, Anduril got plenty of buzz last year with its edgy recruiting campaign, “Don’t Work at Anduril.“

Rather than plush tech perks and work-from-home flexibility, Anduril pitches what Keane calls “grit” — a willingness to take ownership of hard engineering problems and test them in the field. It’s very much an in-office culture, in part because the company builds hardware.

Anduril also moves fast, an approach Hawaiian-shirt-wearing founder Palmer Luckey wields against slower traditional military contractors.

The company’s “grit” translates directly into how Anduril tests its gear.

In rural Carnation, Wash., about 20 miles east of Bellevue, Anduril operates a testing range with a built-out “shoot house” for low-light tactical work. It gives engineers a place to iterate on code and hardware in the mud and rain alongside active-duty warfighters.

Among them: members of the Army’s 75th Ranger Regiment from nearby Joint Base Lewis-McChord, who recently put Anduril’s EagleEye mixed-reality system through its paces on the firing range and obstacle course.

Hands-On with ‘EagleEye’ and Lattice

During a walkthrough of the Bellevue facility, Anduril’s team showed us a wide range of hardware being designed, tested, and calibrated on site.

The centerpiece was EagleEye, the company’s heads-up hardware and software suite built for warfighters. Historically, soldiers have had to lug 3 to 5 pounds of glass and electronics on their helmets, paired with fragmented radios, specialized batteries and thick cables.

Anduril’s system strips that down to a 115-gram pair of augmented reality glasses — about four ounces — built in collaboration with Meta (for waveguides), Canon (for sensors), Qualcomm (for custom silicon) and Oakley (for ballistic protection).

I tried on the lightweight camouflage backpack and glasses — no helmet in this case — in a demo in the Bellevue testing lab. It ran through three operational “vignettes” driven by Anduril’s core Lattice software:

• Tactical HUD: A heads-up display projecting friendly force markers, compass headings, and mini-maps into the user’s field of view so troops don’t have to look down at a handheld screen while moving.
• Threat Detection: Real-time alerts from external AI sensors — such as a tower camera or an overhead drone — highlighting incoming aerial threats directly in the display.
• Command & Control (C2): The ability to assign tasks to autonomous technology. Using a small handheld controller, an operator can send a virtual Ghost drone to a location, pull up a live video feed and execute a simulated strike.

In each case, the user controls the system — navigating between maps and text — with a click of a button on a small device connected to the front of the backpack.

The team also previewed its upcoming digital night vision system. Instead of the narrow “toilet paper roll” view of traditional analog goggles, Anduril’s VR-style digital displays offer an 84-degree field of view. That’s more than double the 40 degrees warfighters get in devices today.

Using machine learning models, the system fuses thermal imagery and low-light camera feeds in real time, making heat signatures leap out in pitch-black environments.

To ensure every pixel lands accurately without causing motion sickness, Anduril’s engineers use custom robotic arms to run geometric calibration on each lens distortion map before it leaves the facility. An engineer running the testing equipment politely asked GeekWire not to photograph the system.

The night vision system has not yet been deployed but will be part of the Soldier Borne Mission Command prototype delivery to the U.S. Army next year, said Stephanie Davis, communications manager for Anduril’s connected warfare group.

Protests, hiring and hardware

Operating a high-profile defense company in the Seattle area doesn’t come without friction. Activist groups recently staged protests outside Anduril’s downtown Seattle offices, targeting the company’s autonomous weapons development and military contracts.

At the time, Anduril issued a statement to GeekWire saying that it respects the right to free speech.  “That said, it is perplexing when people choose to protest a company dedicated to supporting the very military that safeguards those rights,” the company added.

When asked about the pushback, Keane said critics don’t affect Anduril’s hiring. “There’s protests at every company, frankly.”

Anduril’s hiring reaches well beyond Big Tech. Drew Swanson, a lead architect, spent 13 years in the military working in communications supporting special operations units in the field. He described an Anduril technology called Squad-A, which helps squad leaders pick the best network connections to stitch together incoming intelligence feeds.

Swanson said the draw of Anduril is the chance to escape corporate bureaucracy and tackle high-stakes physical problems, reflected in comments he gets from others in Seattle tech.

“One of the biggest things that I always hear is: ‘I want to come over there because you guys are going after really hard problems,'” Swanson said of conversations with tech colleagues around Seattle.

Solving those problems often comes down to fundamental hardware redesigns, like combining a soldier’s ballistic vest, battery and edge computing device into a single body plate. Keane showed off a prototype as the tour wrapped up — an example of Anduril’s broader approach.

“Batteries are such a huge thing,” he said, pointing to the body armor. “If you put the three of them together… you can start to get rid of stuff. You take what was historically three separate heavy things and turn it into one software-enabled platform.”

Washington state has assembled the country’s deepest bench of quantum technology assets — including two major cloud platforms, a national lab and the first U.S. quantum computer factory — but has captured almost none of the federal money now driving the industry.

That disconnect is the focus of a report released Tuesday morning by the Washington Technology Industry Association, the Northwest Quantum Nexus and the state Department of Commerce.

Since a January 2023 assessment, Washington state’s quantum ecosystem “has grown denser, more visible, and physically larger,” reads the report, authored by Nirav S. Desai, CEO of innovation consultancy Moonbeam Exchange. “Yet the state has fallen behind peers on the coordinated public investment that converts assets into a resilient cluster.”

The report makes five recommendations:

• Use the governor’s office to convene a standing group — universities, the Pacific Northwest National Laboratory, companies, investors and the Commerce Department — that decides which federal grants to pursue and assembles joint bids for funding.
• Pick one to three specialties to compete in, such as post-quantum cryptography or industry applications, rather than chasing all of quantum.
• Build the workforce at all three levels: developers first, then the missing undergraduate and technician programs.
• Position the Seattle region and Washington state as a landing pad for Japanese, Korean and Taiwanese quantum companies.
• Create a single point of contact for founders, and promote the quantum machine access the state already has but hasn’t advertised.

“This isn’t a resource problem; it’s a coordination problem, and that’s the good news,” said Nick Ellingson, WTIA’s vice president of innovation and entrepreneurship, in a news release.

Quantum computers, which have yet to be proven commercially viable, can hold multiple states at once and could eventually solve problems beyond the reach of conventional machines.

The report points to efforts by states including Illinois, Maryland and Colorado, which have committed $500 million, roughly $200 million and $127 million respectively to quantum campuses and research hubs.

In Washington state, Microsoft and Amazon are among the major tech companies leveraging their research to build quantum platforms and technology. Maryland-based IonQ’s Bothell, Wash., plant, the country’s first dedicated quantum computer factory, employs about 100 people, part of an expansion the report says could generate 1,200 to 2,000 jobs within five years.

Gov. Bob Ferguson vetoed $100,000 for a state quantum strategy in May 2025, citing fiscal pressure, while directing the Commerce Department to build industry partnerships and produce policy recommendations. Tuesday’s report was funded by a grant administered by Commerce.

In April, Ferguson steered $500,000 from the state’s Strategic Reserve Fund to IonQ’s Bothell expansion, Washington’s first direct investment in quantum.

Illinois, by comparison, has committed more than $500 million to the Illinois Quantum and Microelectronics Park, a campus near Chicago anchored by PsiQuantum and IBM.

Read the full report here.

Microsoft and Amazon both saw their stocks surge again Monday, riding a post-earnings tech wave across the stock market that pushed Amazon past $3 trillion in value for the first time.

The gains follow earnings reports last week in which both companies’ cloud platforms exceeded expectations. Microsoft said Azure grew 43%, passing $100 billion in annual revenue for the first time. Amazon said AWS grew 37%, its fastest pace in 18 quarters.

Microsoft and Amazon are now the world’s fourth and fifth most valuable companies, respectively. The three ahead of them (Nvidia, Alphabet and Apple) are all headquartered in the Bay Area, although each has sizeable engineering centers in the Seattle region.

Amazon rose 4.6% in intraday trading to $284.15 as of publication time, after touching an all-time high of $287.20 earlier in the session, giving it a market value of $3.06 trillion.

Microsoft climbed 5.2% to $488.97, worth $3.63 trillion. Its rally began Thursday, when it added nearly $450 billion in market value, the largest one-day gain by any company on record.

The rallies came despite AI spending plans that have unsettled investors for much of the year. Microsoft went into earnings near a one-year low, after a $357 billion wipeout to start the year.

It’s all still coming at a huge cost. Microsoft spent a record $41 billion on capital projects last quarter and told investors to expect more than $50 billion in the current quarter. Amazon raised its 2026 forecast to about $220 billion from $200 billion, citing rising memory chip prices.

In one sign of the impact of the spending, Microsoft’s free cash flow fell 23% last quarter. Amazon’s free cash flow turned negative for the first time since 2023.

But cloud growth and other signs of demand for AI seem to have appeased investors for now.

Amazon CEO Andy Jassy told investors the spending reflects unmet demand: “Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too. In fact, the demand we already have for 2028 is striking.”

The gains come as both companies operate with fewer people. Amazon confirmed 16,000 more corporate job cuts in January, bringing the total to 30,000 since October, along with more recent reductions in its robotics and artificial general intelligence groups.

Microsoft cut 4,800 jobs in July, revamping its salesforce and overhauling Xbox.

This week on the GeekWire podcast: Microsoft and Amazon both reported quarterly numbers, and both stocks rose on cloud results that beat expectations. Is all that AI spending paying off? And in related news, Microsoft sees a rare annual headcount decline, hitting product R&D hardest. 

Plus: Satya Nadella builds a Power BI dashboard out of an analyst’s research report, and touts it on the earnings call to make a bigger point. Jeff Bezos names Amazon’s chips business as the long-awaited fourth pillar. And AI House managing director Jacob Colker delivers a much-needed pep talk for Seattle tech, calling on the region to recognize and build on its strengths. 

Related stories and links

Microsoft and Amazon earnings

• Microsoft Azure tops $100B in annual revenue as record AI spending cuts into cash flow
• AWS is ‘booming,’ but Amazon’s free cash flow turns negative on record AI spending
• Microsoft R&D jobs drop for second straight year as total headcount falls for first time in a decade
• Which Microsoft businesses are growing and shrinking, according to obscure table in regulatory filing

Amazon’s fourth pillar

• Jeff Bezos says this business is becoming Amazon’s next ‘pillar’

A rallying cry for Seattle tech

• Watch: A venture capitalist’s passionate speech, a rallying cry, really, about Seattle
• Seattle’s AI2 Incubator rebrands as AI House, and adds key investor as managing director
• ‘I’m tired of that narrative’: Seattle VC pushes back on tech exodus talk

The Washington tech ecosystem

• New map traces Washington state’s tech ‘universe’ to a few key hubs, and shows what’s at risk
• After hiring AWS exec and raising $107M seed round, Virginia startup plants flag in Seattle area
• GeekWire’s Seattle engineering centers list

Subscribe to GeekWire in Apple Podcasts, Spotify, or wherever you listen.

Amazon Web Services revenue grew 37% last quarter, its fastest pace since the end of 2021, but the company is spending so much on data centers and infrastructure to fuel that growth that its free cash flow for the past 12 months turned negative for the first time since 2023.

Overall, the tech giant reported $200.6 billion in revenue for the second quarter, up 20%, with operating income of $27.5 billion, up 43%. That beat Wall Street’s expectations of about $196.4 billion in revenue, and topped the high end of Amazon’s own guidance.

Profits were $62.6 billion, or $5.75 per share. However, that included $53.4 billion in pre-tax gains, primarily on Amazon’s investment in Anthropic, which inflated the bottom line. Excluding those gains, EPS would have been about $1.95, above analyst expectations of $1.82.

Amazon shares rose more than 8% in after-hours trading following the report.

AWS revenue reached $42.2 billion in the quarter, a $169 billion annualized run rate. Operating income in the cloud division rose 64% to $16.6 billion, lifting AWS operating margin to 39.4% from 32.9% a year ago — evidence that the AI buildout is starting to convert into profit, not just revenue.

“AWS is booming,” CEO Andy Jassy said in the release, adding that the company’s AI and chips businesses “each eclipsed run rates of more than $25 billion.” The chips business, which Jeff Bezos called the next pillar of the company this week, was at a $20 billion run rate three months ago.

Amazon’s operations generated $161.4 billion over the past 12 months, but the company spent a net $169 billion on property and equipment — up $66.1 billion from a year earlier, an increase Amazon attributed primarily to AI investments — leaving a shortfall of $7.6 billion in free cash flow.

A year earlier, it had $18.2 billion left over for the prior 12 months, by comparison.

Free cash flow is what’s left after a company covers its operating costs and pays for things like data centers and warehouses. It’s an important measure of financial health, which investors watch closely because it shows how much cash a business actually creates after paying for its own growth.

Update: Amazon raised its capital spending forecast on its earnings call. Jassy said the company now expects to spend about $220 billion in cash capex this year, up from the roughly $200 billion it projected earlier, attributing the increase to the higher cost of memory chips.

He addressed the cash flow squeeze directly, framing it as a matter of timing. Data centers require capital about two years before servers can be installed and start generating revenue, he said, but once open, they can be monetized for more than 30 years without repeating that upfront cost.

Servers and networking equipment run on a shorter cycle, purchased a few months before going into service. Those take a little under three years to break even, Jassy said, against a useful life of at least five to six years.

He said most of Amazon’s AI capacity is now contracted for terms of five years or longer.

“We’ll spend a lot of capex and encounter free cash flow headwinds until these data centers come online, can be monetized, and we get a few years into these servers being utilized,” Jassy said.

Other notes from Amazon’s earnings release:

Online store sales rose 15% to $70.4 billion, up from 10% growth in the same quarter a year ago. It remains Amazon’s largest single revenue line at about 35% of total revenue, and it is the line most directly affected by the decision to move Prime Day into June, into the second quarter. Last year, the annual online sales event took place in the third quarter.

Advertising revenue rose 26% to $19.8 billion, up from 22% growth in the same quarter a year ago. It has generated about $76 billion over the past 12 months, making it one of Amazon’s fastest-growing businesses. Prime Day lifted this line as well, because the event drives a surge in spending by sellers and brands competing for placement.

Third-party seller services revenue, which includes commissions and fulfillment and shipping fees Amazon charges independent merchants, rose 16% to $46.8 billion, up from 10% growth in the same quarter a year ago. Independent sellers accounted for 61% of units sold in Amazon’s stores, roughly flat with recent quarters. Prime Day boosted this line as well.

Subscription services, which includes Prime memberships, grew 12% to $13.7 billion. The line has grown between 10% and 12% every quarter for the past year and a half. Analysts have been expecting a Prime price increase, which has not yet materialized.

Microsoft’s Azure cloud business grew 43% last quarter, blowing past the company’s own forecast and surpassing $100 billion in annual revenue for the first time, providing fresh evidence of the potential for artificial intelligence to fuel new growth for the tech giant.

The company’s results for its fiscal fourth quarter also showed the price of that growth: capital spending hit a record $41 billion, largely to support the company’s AI buildout, and free cash flow sank 23% even as operating profits jumped 18%.

And in a new twist, Microsoft shares rose more than 5% in after-hours trading, in contrast with the recent pattern in which the company’s strong results were met with selloffs that pushed its stock near a one-year low.

Companywide results: Overall, Microsoft reported revenue of $90 billion for the quarter, up 18% from a year ago, and net income of $35.8 billion, up 31%. Analysts had expected $87.7 billion in revenue, a figure that was already at the top of Microsoft’s own guidance range.

Microsoft’s adjusted earnings of $4.74 per share topped the $4.24 that analysts expected, according to Yahoo Finance. That included a $3.2 billion gain on Microsoft’s investment in Anthropic, part of a 27-cent benefit from one-time items. Even excluding those items, the company said, it exceeded expectations across revenue, operating income and earnings per share.

Microsoft 365 Copilot surpassed 30 million paid seats, up from 20 million last quarter. That’s still less than 7% of the roughly 450 million commercial Microsoft 365 seats, a gap that has drawn investor skepticism all year.

Microsoft’s backlog grew 84% to $678 billion. Known as remaining performance obligation, or RPO, it’s the value of contracts that customers have signed but that Microsoft hasn’t delivered on yet, basically the business Microsoft has already locked in but has yet to record as revenue.

Investors have been worried for a year that too much of it came from a single customer, OpenAI. Microsoft said all of the $51 billion increase over the prior quarter came from customers other than the big AI model companies. Setting OpenAI aside, the backlog still grew 25%.

Windows OEM and Devices revenue declined 7%, hurt by slower PC demand and a tough comparison with last year’s Windows 10 upgrade wave. The decline would have been steeper, but PC makers built more machines to get ahead of rising memory prices, and Microsoft collects its Windows fee when a PC is built rather than when it’s sold.

Xbox content and services revenue fell 10% and Xbox hardware fell 13%. Microsoft also wrote down the value of unspecified Xbox assets. The company grouped that charge with severance costs and lower-than-expected costs from its retirement program — a net $500 million hit to operating income — and declined to say how much of it was Xbox or what was written down.

Amazon reports quarterly earnings Thursday afternoon, facing the same test as every other big tech company right now: whether it’s generating enough business to justify its massive AI spending.

Wall Street expects revenue of about $196.4 billion, up 17% from a year ago, and earnings of $1.82 per share. That’s essentially the midpoint of Amazon’s own forecast for the second quarter.

Part of that growth is due to the calendar. Prime Day ran June 23-26 this year, during the second quarter in the U.S. and most large markets. Last year it ran July 8-11, in the third quarter. That gives Amazon’s retail numbers a boost this time that the year-ago quarter didn’t have.

Another factor is the cloud. AWS grew revenue 28% last quarter, its fastest rate in nearly four years, and analysts expect the acceleration to continue with revenue of roughly $40.5 billion for the second quarter, up 31%, according to Zacks Consensus Estimates.

The company plans a record $200 billion in capital expenditures this year, nearly all of it for data centers, servers and chips to support increased capacity for training and running AI models.

Amazon is making those investments based in part on demand from big AI companies including OpenAI and Anthropic, which have signed commitments to AWS worth $138 billion and more than $100 billion, respectively, for the coming years.

“We’re not investing approximately $200 billion in capex in 2026 on a hunch,” CEO Andy Jassy wrote in his April shareholder letter.

In the meantime, the spending is absorbing nearly all of the cash from Amazon’s operations. Free cash flow fell to $1.2 billion over the past 12 months, from $25.9 billion a year earlier.

Investors seem to be losing patience with that tradeoff overall. Google parent Alphabet beat expectations last week and its stock fell anyway, after raising its own capital spending forecast to as much as $205 billion for the year. Microsoft reports earnings Wednesday afternoon.

One difference for Amazon is its custom chip business — Graviton, Trainium and Nitro — which passed a $20 billion annual revenue run rate last quarter. Jeff Bezos said this week that it’s becoming a fourth pillar of the company, alongside Marketplace, Prime and AWS.

The company is overhauling its approach to AI model development. Business Insider reported this week that Amazon is winding down most of its in-house Nova models and concentrating engineers on a new frontier model effort, with a new flagship model expected at re:Invent this fall.

Amazon cut jobs in its AGI organization last week and confirmed that it’s closing its San Francisco AI site, while saying its frontier model research would continue.

At the same time, AWS is spending to help other companies deploy AI, committing $1 billion at the end of June to embed its own engineers with enterprise customers building agentic systems, following similar moves by OpenAI and Anthropic.

Check back with GeekWire for coverage on Thursday afternoon.

Amazon’s next pillar could be built on a foundation of silicon.

In a new interview with Fortune, Amazon founder and Executive Chair Jeff Bezos says the company’s custom chip business is on track to become one of Amazon’s most durable businesses, placing it alongside Marketplace, Prime, and Amazon Web Services as a core pillar of the company.

“A few of our offerings have become durable pillars, things like Marketplace and Prime and AWS,” Bezos told Fortune. “What I see right now is that our chips business, our silicon business, is lining up to be our next pillar.”

The comments offer one of Bezos’ clearest public endorsements yet of Amazon’s push to design its own chips for artificial intelligence, an increasingly important strategy as demand for AI computing soars and companies look for alternatives to Nvidia’s dominant processors.

More than a decade of investment

Amazon has invested heavily in custom silicon through Annapurna Labs, the Israeli chip startup it acquired in 2015. The company now develops its own AI chips under the Trainium and Inferentia brands, designed to train and run large language models while reducing costs for customers using Amazon Web Services.

AWS has positioned the chips as a lower-cost alternative for AI developers. AWS has positioned the chips as a lower-cost alternative for AI developers. Anthropic trains and runs its Claude models on Trainium, and OpenAI has committed to consume about 2 gigawatts of Trainium capacity, ramping in 2027.

The company disclosed revenue for its in-house data center chips for the first time earlier this year, and since then its Trainium, Graviton, and Nitro chips have grown to a combined annual run rate of more than $20 billion. Amazon has been pouring billions of dollars into AI infrastructure, including new data centers and custom networking hardware.

Amazon CEO Andy Jassy has repeatedly argued that demand for AI computing will remain strong for years, making investments in chips, servers, networking equipment, and power generation essential to the company’s long-term growth.

In an earnings release earlier this year, Jassy signaled plans to pour a record $200 billion in capital expenditures across Amazon in 2026, citing “seminal opportunities like AI, chips, robotics, and low earth orbit satellites.”

The real potential for Amazon’s chips business could come in going beyond the walls of its own data centers. Jassy wrote in his annual letter to shareholders this year that it’s “quite possible” Amazon will sell racks of its internally developed chips to third parties in the future.

Amazon’s fourth pillar?

This discussion about Amazon’s “pillars” goes back to Bezos’ 2014 letter to shareholders, where he described four characteristics of what he called a “dreamy” business: “Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time — with the potential to endure for decades.”

AWS, Marketplace, and Prime are considered the first three pillars. The question of what could become Amazon’s “fourth pillar” has been debated for more than a decade, with areas including shipping and logistics and Alexa cited as contenders in the past.

The company’s big bet on silicon also was emphasized by Jassy in the Fortune piece. He told the magazine that chips are often the key to computing. “The growth in AI has been so significant, but we have a chips business that we built over the last decade here that is growing very quickly,” he said.

The profile appeared alongside Fortune’s release of its 2026 Global 500 ranking, which placed Amazon at No. 1 for the first time, ending Walmart’s 12-year run as the world’s largest company by revenue after Amazon surpassed $700 billion in annual sales, as reported previously.

Walmart fell to No. 2, followed by State Grid of China, UnitedHealth Group, and Saudi Aramco. The magazine reports that Amazon is on pace to be the first trillion dollar company by revenue.

Amazon reports Q2 2026 earnings on Thursday afternoon. Check back with GeekWire for coverage.

Microsoft has topped earnings expectations consistently in recent years, yet its stock is near a one-year low. So while it’s worth paying attention to revenue and profits when the company reports its fiscal year-end results Wednesday, there are clearly other forces at play on Wall Street.

Here are the key stats and trendlines to watch going into the earnings report for the fourth quarter of the company’s 2026 fiscal year, ended June 30.

Core numbers: Analysts expect revenue of about $87.7 billion for the quarter, up 14.7% from a year ago, and earnings of $4.24 per share, up 16%, according to Yahoo Finance. Microsoft’s own revenue guidance was $86.7 billion to $87.8 billion — meaning Wall Street is looking for a result at the very top of the company’s range.

For the full fiscal year, that works out to roughly $329 billion in revenue, up 17% from $281.7 billion in fiscal 2025.

Capital expense: This is the big one. Microsoft told investors to expect more than $40 billion in capital spending for the quarter, which would be a record — up from $31.9 billion in the March quarter and $37.5 billion in the one before that. About two-thirds goes to GPUs and other short-lived hardware.

For the calendar year, the company expects to spend roughly $190 billion. Chief Financial Officer Amy Hood said about $25 billion of that total is the result of higher component prices.

One big question this week will be the company’s guidance for capex going forward. Because this is the fiscal year-end, Wednesday brings the company’s first capital spending guidance for fiscal 2027, which began July 1.

Capex concerns: Google parent Alphabet last week foreshadowed what may happen to Microsoft. It reported revenue up 24% and cloud revenue up 82%, then raised its own capital spending forecast to as much as $205 billion — well above the roughly $188 billion analysts expected. The stock fell 7% the next day and Alphabet fell below its prior $4 trillion market valuation.

Big picture, investors seem to have decided the capital spending is getting ahead of the payoff. Data centers and chips cost money now, while the AI revenue meant to justify them arrives over years — if it ever reaches the scale these companies are promising.

Moody’s Ratings raised its own red flags about this last week, saying the six largest cloud and AI platforms will spend about $785 billion this year and close to $1 trillion in 2027. Demand is real and accelerating, the ratings agency said, but “the ultimate return on investment is unclear.”

Cloud margins: This is where the capital spending starts to become evident in the company’s core quarterly results. Microsoft Cloud gross margin — the share of cloud revenue left after the cost of delivering the service — has slipped from 72% three years ago to 66% last quarter.

For the quarter it reports Wednesday, Microsoft told investors to expect about 64%. On the prior earnings call, Hood attributed the decline to AI infrastructure costs and growing use of GitHub Copilot, partly offset by efficiency gains in Azure.

Microsoft doesn’t absorb the cost of a data center all at once. It spreads the expense across the years the equipment is expected to last. That cost shows up here, in the expense of running the cloud — making this one of the first places where the capital spending hits earnings.

Microsoft Azure: On its prior conference call, Microsoft said it expected the Azure cloud business to grow 39% to 40% in constant currency in Q4, a slight acceleration from the 39% posted in Q3. Analysts expect roughly the same, with some outliers such as BNP Paribas looking for 41%.

But the published expectations aren’t the real bar. In January, Azure grew 38% — ahead of Microsoft’s guidance — and the stock fell 10%, because Wall Street had privately been expecting 39.4%.

Azure’s growth rate also reflects a choice as much as it does demand. Microsoft has been routing scarce computing capacity to its own products first — Copilot, GitHub Copilot, internal research — and selling what remains to Azure customers. Hood has said the growth rate would have been higher had that capacity gone to customers instead. Demand continues to outrun supply, and the company expects to stay “constrained at least through 2026.”

Business Insider reported Sunday that the shortage of supply has pushed Microsoft to shop for additional computing capacity outside its own data centers, evaluating capacity from Amazon and Google, and that Amazon stepped in following a series of GitHub outages.

Copilot and AI revenue: Microsoft said in April that its AI business had reached a $37 billion annual revenue run rate, up 123% from a year earlier. It was the first update to that number since January 2025, when the company put it at $13 billion. Whether Microsoft discloses it a third time Wednesday is a signal in itself.

Microsoft 365 Copilot passed 20 million paid seats last quarter, up from 15 million in January. That’s about 4.4% of the 450 million commercial seats across Microsoft 365 — the gap that has drawn skepticism from investors all year. Microsoft said it expects the number of new paid seats to grow again this quarter.

Meanwhile, the company is launching new initiatives to drive adoption of AI among its customers. Earlier this month it launched the Microsoft Frontier Company, a $2.5 billion effort to put 6,000 engineers inside customer organizations to help them deploy AI.

Wednesday is also the first report since Microsoft changed how it charges for GitHub Copilot. As of June 1, customers pay based on usage rather than a flat fee per user.

The OpenAI backlog: Microsoft’s remaining performance obligations — RPO, a measure of contracts customers have signed but the company has not yet fulfilled — reached $627 billion last quarter, up 99% from a year earlier. About a quarter of that is expected to become revenue in the next 12 months. It’s the strongest evidence that there’s real demand supporting the AI buildout.

But the RPO is also highly concentrated. In January, when it stood at $625 billion, 45% was tied to OpenAI — roughly $281 billion committed by a single customer that is still losing money. Take OpenAI out of last quarter’s figure and the growth drops from 99% to 26%.

Then in April, Microsoft and OpenAI revamped their partnership, and OpenAI ended its exclusive commitment to run on Azure.

Reliability: On July 23, a bug in Microsoft’s automated network maintenance tooling cut a West US Azure data center off from the company’s global network, knocking out Teams, SharePoint, OneDrive and Copilot Chat for about five hours. Microsoft has published a preliminary post-incident report, and a final one is due within two weeks.

The outage falls in the quarter that began July 1, so it won’t appear in Wednesday’s numbers. But it comes as Microsoft is asking businesses to hand AI agents real control of their operations.

Retirement charge: Wednesday’s results will include about $900 million in one-time costs from Microsoft’s voluntary retirement program, the first in the company’s 51-year history. Hood said roughly $350 million falls in the cost of revenue and $550 million in operating expenses.

About 8,750 U.S. employees were eligible — 7% of Microsoft’s U.S. workforce — and about 30% accepted, Chief People Officer Amy Coleman confirmed in an interview with GeekWire, in line with what the company expected. Those departures reduced the size of the 4,800-job cut Microsoft announced July 6, which happened after this quarter ended.

Even with the retirement costs, Microsoft told investors it expects operating margins for the full fiscal year to be about a point higher than last year. Hood also said on last quarter’s call that headcount declined year over year and will keep declining in fiscal 2027.

Windows: Microsoft expects Windows OEM revenue — what PC makers pay to put Windows on their machines — to decline close to 20% this quarter.

A few factors are driving this:

• Last year’s wave of PC upgrades, when support for Windows 10 ended, makes for a tough comparison.
• PC makers stocked up on parts and machines ahead of rising memory prices and are now working through them.
• The PC market itself is slower, because memory prices have made computers more expensive.

The memory shortage is hitting Microsoft a few different ways. In addition to adding about $25 billion to the company’s capital spending this calendar year, as noted above, it lowers what Microsoft earns from Windows. Also, in late June, Microsoft raised Xbox console prices by $100 to $150, saying storage and memory costs had risen more than 2.5 times.

This week: Facebook parent Meta reports the same afternoon as Microsoft, with Apple and Amazon on Thursday and Alphabet already out. Check back Wednesday afternoon for coverage.