This article first appeared on GuruFocus.
Revenue: $200.6 billion, up 20% year-over-year.
Operating Income: $27.5 billion, up 43% year-over-year.
North America Segment Revenue: $116.2 billion, up 16% year-over-year.
International Segment Revenue: $42.2 billion, up 15% year-over-year (excluding foreign exchange impact).
AWS Revenue: $42.2 billion, up 36.7% year-over-year.
AWS Operating Income: $16.6 billion.
Advertising Revenue: $19.8 billion, up 26% year-over-year.
North America Operating Margin: 7.9% ($9.1 billion operating income).
International Operating Margin: 4.1% ($1.7 billion operating income).
Cash Capital Expenditures: $53.1 billion in Q2.
Q3 Guidance: Net sales expected between $197 billion and $202 billion; operating income expected between $22.5 billion and $26.5 billion.
Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Amazon.com Inc (NASDAQ:AMZN) reported a strong Q2 2026 with revenue of $200.6 billion, up 20% year-over-year, and operating income of $27.5 billion, up 43% year-over-year.
AWS revenue growth accelerated for the fifth straight quarter, reaching 36.7% year-over-year, with an annualized run rate of $169 billion and a backlog of $496 billion growing triple digits.
AWS operating margin expanded to 39% in Q2, up 650 basis points year-over-year, driven by efficiency gains and capacity optimization.
Amazon’s AI and chips businesses are booming, with annual revenue run rates exceeding $25 billion each, growing triple digits, and strong adoption from major AI labs like Anthropic and OpenAI.
The company is seeing strong momentum in its grocery and everyday essentials business, with perishable customer growth up 50% since the start of the year and same-day delivery expanding to 2,300 cities.
Amazon’s advertising business grew 26% year-over-year to $19.8 billion, with strong engagement in Prime Video ads and live sports, and AI-powered tools like Ads Agent improving advertiser performance.
The company raised its 2026 CapEx guidance to $220 billion, reflecting strong demand and a clear path to significant returns on investment in AI and data centers.
Amazon’s new initiatives, such as Amazon Quick and AWS Continuum, are gaining traction with enterprise customers, positioning the company for future growth in agentic AI and security solutions.
Negative Points
Amazon.com Inc (NASDAQ:AMZN) faces significant cost pressures from higher memory chip prices and transportation costs, including fuel inflation and linehaul rates, which could impact margins.
The company’s Q3 2026 revenue guidance of $197-202 billion implies a sequential deceleration in growth, partly due to the timing shift of Prime Day into Q2, creating noise in financial modeling.
Amazon’s heavy CapEx investment of $220 billion in 2026 is expected to create free cash flow headwinds in the short term, as data centers are built before they can be monetized.
The company acknowledges that it will not have enough capacity to meet all demand in 2026 and 2027, potentially limiting growth opportunities in the near term.
Tariff-related refunds of $600 million in Q2 were a one-time benefit, and the company largely absorbed tariff costs rather than passing them on to customers, which could pressure profitability.
Foreign exchange rates are expected to have an unfavorable impact of approximately 80 basis points on Q3 revenue growth, adding to headwinds.
The company faces uncertainty in the AI market, with the potential for lower margins on AI workloads, although management remains optimistic about long-term returns.
Amazon’s reliance on third-party suppliers for memory and other components exposes it to supply chain volatility and price inflation, which could affect future costs.
Q & A Highlights
Q: Many have assumed that AI workloads would be lower margin, at least near term. Can you talk about the drivers of the 39% AWS operating margin in 2Q and how we should think about sustainability? And when you think about the full stack offering, does Amazon need its own leading model towards the frontier?A: Brian Olsavsky (CFO) noted that AWS margins remained strong despite large investments, up 650 basis points year-over-year (520 bps excluding the derivative accounting gain). He attributed this to disciplined efficiency gains, capacity optimization, and closely managed fixed costs, while acknowledging margins will fluctuate. Andy Jassy (CEO) added that the AI business is following the same margin trajectory as the core business, and is actually a bit ahead of that pace. On frontier models, Jassy stated that AWS can have a wildly successful business without its own frontier model, as there will not be one model to rule the world, and Bedrock’s strength lies in offering leading selection with governance and security. However, Amazon is pursuing its own frontier model for additional cost control, prioritization of training focus, and speed, expecting at least a half dozen comparably good models within a few years, with one of them being Amazon’s.
Q: Was the AWS acceleration really driven by a lot of capacity coming online in the quarter? Any help you can give us on how much you might be adding in the second half versus the first half and how you’re thinking about ’27?A: Andy Jassy (CEO) explained that the significant growth is driven by customers choosing AWS for its broadest functionality, strongest operational performance and security, and because inference workloads want to live near their data. He highlighted that 85% of global IT spend is still on-premises, and the equation is flipping. AI is pulling along core growth, as post-training and agent tool use is driven on CPUs, where Graviton has an advantage. He confirmed they are on pace to double power capacity by the end of ’27 compared to ’25, and that a lion’s share of ’27 capacity is already largely reserved, with significant capacity reserved for ’28.
Q: As you look into 2027, are you at a point where you’re going to be able to start to slow that long-lived data center spend at all in ’27? And how do you think about when you could sell Trainium to third-party data centers and the ROIC on that versus core AWS loads?A: Andy Jassy (CEO) stated that they have so much demand right now that they will not be slowing data center spend. He described the AI adoption curve as a “barbell,” with AI labs on one end and enterprises getting value from cost avoidance on the other, but the middleexisting enterprise production workloadsis still early and will be the largest absolute segment. He believes AWS could become a $1 trillion annual revenue business. On Trainium, Jassy noted the chips business has over $25 billion in annual revenue, with multiyear, multi-gigawatt commitments from Anthropic and OpenAI. He confirmed they are actively having conversations with customers interested in purchasing Trainium chips separate from the cloud, and there is a real chance they will do that in the future.
Q: Is it fair to say that there’s a more concerted effort to move into the application layer with Kiro and Transform? And given the demand signals and plans for additional capacity, what are your current thoughts on sources of capital for the build-out over the next couple of years?A: Brian Olsavsky (CFO) said they have a lot of options available to fund AWS growth, including debt issuance, and will continue to look at all options and make appropriate decisions at the right time. Andy Jassy (CEO) confirmed a substantial opportunity in building agentic applications, citing Kiro (coding agent), Amazon Quick (AI work companion), Amazon Connect (call center service), AWS Transform (software migration), and the newly launched Continuum (security vulnerability remediation). He noted these are borne out of customer needs and internal Amazon usage, and there are several others in development.
Q: Your RPO reported is 2.5x that of the third quarter of ’25 when you gave the doubling of capacity comments for year-end ’27. How does that RPO number and the massive expansion there impact your outlook for future capacity? And could you talk about how your pricing strategy at AWS incorporates future cost inflation?A: Andy Jassy (CEO) confirmed the backlog is very substantially continuing to grow, reflecting customer enthusiasm for AWS across core and AI, and that this is all taken into account in CapEx projections. On pricing, he explained that most deals are signed agreements with set prices over the contract duration, and new agreements always take into account current costs. He acknowledged that there are inflated prices on components like memory, hard drives, and SSDs, which is not a secret to any company.
Q: When you’re talking about scaling some of your initiatives around fast commerce and a wider array of supply of groceries and everyday essentials, can you talk a little bit about the signal you’re getting from consumers in terms of either adoption rate of those services or what it’s doing the overall spend trends?A: Andy Jassy (CEO) expressed enthusiasm about the growth in everyday essentials and perishables, driven by broader selection and faster delivery. He noted that grocery is over $150 billion in gross merchandise sales, making them the second largest grocer in the U.S. He highlighted that offering perishables in same-day facilities has been a “real needle mover,” with same-day perishables now available in 2,300 U.S. cities. In those cities, 9 of the top 10 best sellers are perishables, monthly active perishable customers are up 50% since the start of the year, and same-day orders with perishables average 3x more units per order. He also mentioned the Daily Shop urban format is off to an amazing start and expanding rapidly.
Q: Can you talk about the drivers of the 39% AWS operating margin in 2Q and just how we should think about sustainability?A: Brian Olsavsky (CFO) said they are pleased with the growth in both revenue and margin expansion in AWS in Q2, especially given the size of the business. Despite large investments, AWS margins have remained strong, up 650 basis points year-over-year (520 bps excluding the derivative accounting gain). He attributed this to disciplined efficiency gains, capacity optimization, and closely managed fixed costs, while noting margins will fluctuate based on investment levels and product mix.
Q: Can you talk about how your pricing strategy at AWS incorporates future cost inflation? Do your longer-term contracts allow for stable return profiles despite cost
For the complete transcript of the earnings call, please refer to the full earnings call transcript.