Amazon surpasses $200 billion in quarterly revenue for the first time. AWS accelerates to its strongest growth in 18 quarters and rewrites AI rules
$AMZN just reported a quarter we'll remember for a long time. For the first time in history, it crossed the $200 billion revenue mark in a single quarter. Operating profit soared to $27.5 billion (+43% year-over-year) and AWS posted +37% growth, its fastest pace in the last 18 quarters. When CEO Andy Jassy used the word "booming," it wasn't hyperbole but a dry description of reality.
"AWS is booming, posting 36.7% year-over-year growth in the second quarter, our fastest growth in the last 18 quarters, and our AI and Chips divisions each surpassed an annualized revenue run rate of over $25 billion," said Andy Jassy, Amazon's President and CEO. "In our Stores segment, we once again achieved record delivery speeds for Prime members in the first half of the year – over 40% more shipments were delivered same day or next day, while Grocery and Everyday Essentials segments grew significantly faster than other parts of the business. And the Advertising segment had another strong quarter with 26% year-over-year growth. There's a lot to be excited about, and we have much more in store for customers in the second half of the year and beyond."
Andy Jassy, Amazon CEO
Yet beneath the surface, a far more interesting discussion is taking place. Amazon poured $173 billion into capex over the last 12 months. Free cash flow dropped from +$18 billion a year ago to -$7.6 billion today. Some investors are raising eyebrows, while others call it the best investment thesis on the market. I'm watching both and have a clear opinion.
Let's break it down step by step.
Amazon's Q2 2026 Cash Flow and Profit Analysis
Milestone: $200 billion per quarter
Let's first look at the headline numbers, because they deserve attention. Revenue rose to $200.6 billion, a 20% year-over-year increase. The North America segment added 16%, and Amazon Business hit an annualized run rate of $60 billion. The International segment woke up, growing 15%, and operating margin reached 4.1%, the highest in the last year. The advertising business continues its rapid pace with +26% growth, contributing $19.8 billion for the quarter. Advertising at Amazon is now a silent giant, which on its own would be one of the largest advertising companies in the world.
Net income looks explosive – $62.6 billion versus $18.2 billion a year ago. But to be fair: a large part of this jump is a $53.4 billion non-operating gain from the investment in Anthropic. After adjusting for this accounting revaluation item, the core operating business remains, which is still growing solidly at a double-digit pace. I'll come back to Anthropic because its story is immensely interesting from an investor's perspective.
Diluted EPS reached $5.75 compared to $1.68 a year ago. Operating margin for the quarter stepped up to 13.7%, one of the highest figures Amazon has ever recorded. TTM operating margin is 12.1%. For a company with over $775 billion in annual revenue, this is mathematically hard to believe.
AWS: 37% and fastest growth in 18 quarters
This is for me the most important number in the entire report. AWS delivered $42.2 billion in revenue (+37% year-over-year) and operating income jumped to $16.6 billion, 64% more than a year ago. AWS's operating margin is back at 39.4%, returning this segment to form from its best years.
Even more crucial is the annualized run rate: $169 billion. AWS on its own would be one of the largest technology businesses in the world today. And here comes the part investors must internalize – AWS's AI business exceeded a $25 billion run rate and is growing at triple-digit percentages. The chip business, which includes Trainium and Graviton, also exceeded a $25 billion run rate with the same growth rate.
This means one thing: Jassy has managed to convince the market that AWS is not just a "cloud catching up" to Azure and Google Cloud. AWS is back in the role of AI infrastructure leader. Trainium has secured multi-gigawatt contracts from Anthropic and OpenAI, which are currently the pair of AI labs effectively shaping the future of the business. Graviton5 has reached full availability and is used by 98% of the top 1000 EC2 customers.
The point: AWS is no longer just a platform for hosting websites. It's the backbone of the global AI economy, and Amazon has built a position from which it's hard to be dethroned.
Capex: $173 billion and why negative FCF isn't a problem
This is the point where investors are most divided into two camps. Let's look at the facts without emotion.
Amazon spent $173 billion on property and equipment purchases over the last twelve months, 64% more than in the same period the previous year. Free cash flow is -$7.6 billion. A year ago it was +$18.2 billion. The bear thesis says: "Amazon is spending unsustainably, margins will worsen, the stock must correct."
Honestly? I don't think it's fair to look at it that way. Where is that money going? Into AI datacenter capacity, into custom chips (Trainium, Graviton), into expanding the fulfillment network (Amazon Now delivers in 30 minutes in nine countries), and into Amazon Leo satellites (nearly 400 satellites in orbit, commercial launch this year). Each of these areas is at the core of strategic infrastructure for the next decade.
Key metrics show that capex is generating the expected cash flow. Operating cash flow rose to $161.4 billion (+33% year-over-year). That's the engine funding the capex. At the same time, Amazon raised $67 billion in new long-term debt for the half-year, ensuring flexibility to continue the pace without pressure on operating liquidity.
The bear thesis would have merit if capex were going into a business with no demand. But the AWS AI segment is growing triple digits, Trainium has multi-gigawatt contracts from the world's two largest AI labs, and Bedrock is onboarding customers faster than in its first two years after launch. This is capex that has demand secured even before installation is complete.
Anthropic gain: $53.4 billion as a reminder of investment mastery
One thing many readers will take away from the report is that $53.4 billion non-operating pre-tax income, primarily from the investment in Anthropic. Amazon gradually invested over $8 billion in Anthropic in 2023–2024. The revaluation gain matches Anthropic's current valuation, which according to publicly available information is approaching the $170 billion mark.
It's not a cash gain, but an accounting revaluation item that inflated headline EPS. An investor must correctly distinguish that. But it says one important thing about Amazon management: they made one of the best investments of this decade. For eight billion, they got a stake in a company that today defines the AI landscape. And that same company is giving them multi-gigawatt contracts on Trainium.
Guidance: conservative, but with a catch
For Q3, Amazon guides revenue of $197–202 billion (+9% to 12% year-over-year), but with a note that excluding the Prime Day timing effect, growth would be about 4% higher. Operating income guidance is $22.5–26.5 billion, a solid year-over-year increase from $17.4 billion.
When an experienced reader translates this: the guidance is intentionally conservative, with room to beat. Amazon repeatedly tends to exceed its own upper range.
Do I hold Amazon in my portfolio?
I'm sitting on my Amazon with high conviction, and this report only confirmed it. I'll say it straight: AWS growth of 37% is exactly the thing I wanted to see. This company faced a narrative over the last 18 months that Google $GOOG Cloud and Microsoft $MSFT Azure had surpassed it in AI. Andy Jassy answered with a number that swept that narrative away – the fastest growth in 4.5 years.
The $173 billion capex doesn't pressure me. It doesn't pressure me because I know where that money is going. I see contracts from Anthropic and OpenAI, I see Bedrock expansions (more customers in the last 6 months than in the first two years after launch), I see Trainium and Graviton as a position where Amazon has its own chips and doesn't need to depend on Nvidia $NVDA for every single workload. This is capex that is buying a moat for the next decade, not wasteful spending.
The Anthropic gain inflated EPS, but it doesn't change my thesis. What matters to me is operating income of $27.5 billion and that margins are growing, not shrinking. The classic "capex kills margin" narrative doesn't work here because advertising, AWS, and subscription services are pushing the mix toward higher profitability.
If the stock were to drop short-term due to FCF concerns, I would add.
Do you hold $AMZN shares in your portfolio?