Amazon just reported the numbers every AWS bear said couldn't happen this late in the cloud giant's life: growth accelerating, not decelerating, to its fastest pace in more than four years. Net sales rose 20% to $200.6 billion. Operating income hit a record $27.5 billion, up 43% year-over-year. And AWS — the segment every hyperscaler earnings watcher has been fixated on this cycle — grew 37%, its fastest growth in 18 quarters, on a $169 billion annualized revenue run rate. Shares jumped more than 8% in after-hours trading on the news, trading as high as $255 versus a $235.50 regular-session close.
This report landed the same week Amazon had been trading down roughly 7.4% over five sessions on AWS-margin scrutiny ahead of the print, and the same broad earnings season in which Alphabet, Meta, and Microsoft all reported heavy AI capex with wildly different market reactions. Amazon's numbers — and the market's immediate reward for them — put it closer to Microsoft's side of that divide than Alphabet's or Meta's.
The Headline Numbers
| Metric | Q2 2026 | Q2 2025 | YoY |
|---|---|---|---|
| Total net sales | $200.6B | $167.7B | +20% |
| Operating income | $27.5B | $19.2B | +43% |
| Operating margin | 13.7% | 11.4% | +230 bps |
| AWS net sales | $42.2B | $30.9B | +37%, fastest in 18 quarters |
| AWS operating income | $16.6B | $10.2B | +64% |
| AWS operating margin | 39.4% | 32.9% | +650 bps |
| Net income | $62.6B | $18.2B | +245% |
| Diluted EPS | $5.75 | $1.68 | +242% |
Every segment grew and every segment's operating income grew faster than its revenue — a genuinely broad-based quarter, not one division carrying the others. North America net sales rose 16% to $116.2 billion with operating income up 21% to $9.1 billion; International grew 15% to $42.2 billion with operating income up 15% to $1.7 billion.
AWS Is the Real Story — and the Margin Expansion Is the Bigger Surprise
AWS growing 37% is itself a major reacceleration story — this segment had been decelerating for years before turning around, and 37% is meaningfully ahead of the 28% growth Amazon posted just one quarter earlier. But the more important number sits one line down: AWS operating margin expanded to 39.4%, up 650 basis points year-over-year and up nearly 200 basis points sequentially from 37.7% last quarter. AWS operating income grew 64% — nearly double its revenue growth rate.
That combination — accelerating growth and expanding margin, simultaneously, in the segment carrying the heaviest AI infrastructure capex — is exactly the evidence Alphabet and Microsoft each pointed to in their own defenses of heavy AI spending this earnings season, and Amazon's numbers here are arguably the cleanest version of that argument yet. A cloud business that's both growing faster and getting more profitable at the same time is very hard to read as "spending without payoff."
The EPS Number Needs the Same Caveat as Everyone Else's This Quarter
Diluted EPS of $5.75, up 242% year-over-year, is a genuinely inflated headline. Amazon's own release states net income included $53.4 billion of non-operating pre-tax other income, primarily from its investment in Anthropic — a mark-to-market gain on Amazon's equity stake, not cash from selling more cloud capacity or ads. This is precisely the same pattern that inflated headline EPS at Alphabet (its SpaceX/Anthropic-adjacent stake), JPMorgan (Visa shares plus SpaceX-related gains), and Tesla (its SpaceX stake) this earnings season — a genuinely recurring theme across nearly every major company holding equity in a hot AI startup right now.
Strip the one-time gain out and the picture is far more mundane, in the best sense: operating income of $27.5 billion, up a clean 43% year-over-year, is the real, repeatable driver of this quarter's strength. The $53.4 billion isn't fake — it's a real gain Amazon can point to on its balance sheet — but it's not operating performance, and treating the reported EPS as the "real" number would badly overstate how fast Amazon's actual business is compounding, even though that actual business is genuinely compounding fast.
Free Cash Flow Turned Negative — Amazon Joins the Club
Trailing-twelve-month free cash flow came in at negative $7.6 billion, down from positive $1.2 billion last quarter and a sharp reversal from positive $25.9 billion a year ago — a swing of more than $33 billion. The driver: purchases of property and equipment rose to a $169.0 billion trailing-twelve-month pace, up 64% year-over-year, as capex accelerated through the AI infrastructure buildout.
That makes Amazon the third major hyperscaler this earnings season to report negative free cash flow, joining Alphabet (its first-ever negative FCF quarter) and Meta (FCF cratering to $784 million from $8.5 billion — Meta's reported basis, which also nets off finance-lease principal; our series, on operating cash flow minus capex, reads $1,746M for that quarter). Unlike Meta, though, Amazon's operating cash flow kept growing right alongside the capex — TTM operating cash flow rose 33% to $161.4 billion, meaning the business is generating meaningfully more cash even as it spends faster than that cash comes in. That's a materially different story than a company where operating cash flow is stagnant while capex balloons.
Guidance
Amazon guided Q3 2026 net sales to $197.0–202.0 billion, implying 9–12% growth — with management specifically noting that excluding the Prime Day timing shift between 2025 and 2026, year-over-year growth would run nearly 400 basis points higher, a useful reminder to normalize for the calendar quirk before reading the headline growth rate at face value. Operating income is guided to $22.5–26.5 billion, comfortably above the $17.4 billion posted in Q3 2025.
Worth flagging directly: the guidance midpoint (~$199.5B) actually sits below the roughly $204.1 billion analysts had been modeling for Q3 — a real, if modest, miss on the forward number, in contrast to Q2's clean beat on every reported metric. That the stock still rallied more than 8% after hours suggests the market weighted this quarter's AWS reacceleration and margin expansion far more heavily than a single quarter of conservative-looking forward guidance — the same "trust the demonstrated trend over the guided number" read that helped Microsoft's stock the week before.
Sector Read-Through
Amazon's report completes a genuinely instructive set of hyperscaler outcomes this earnings season. Alphabet raised capex and fell on the news despite real Cloud margin expansion. Meta's free cash flow collapsed and its stock fell on a lack of a clear monetization offset. Microsoft delivered accelerating Azure growth and a massive contracted backlog, and its stock rallied 8.9%. Amazon's AWS reacceleration, paired with genuine margin expansion in the same segment absorbing the heaviest capex, produced almost the identical market reaction as Microsoft's — an 8%+ after-hours pop, on the same "capex with hard demand evidence attached" logic that separated Microsoft's reception from Alphabet's and Meta's. Two of the four hyperscalers this season now share that same playbook: grow the cloud segment faster, expand its margin at the same time, and the market will reward heavy capex rather than punish it — even when, as with Amazon tonight, the forward guidance itself came in a touch light.
What to Watch
- Whether AWS growth holds near 37% or this quarter reflects some pull-forward or unusually favorable comparison — a second straight quarter at this pace would be a much stronger signal than one.
- Free cash flow's trajectory from here — whether it stays negative as capex continues at this pace, or whether accelerating operating cash flow eventually catches back up.
- Q3's actual growth rate once Prime Day timing is normalized — management flagged this explicitly, so it's worth tracking against their own framing rather than the raw guided range.
- Capex guidance for the back half of 2026 and into 2027, and whether Amazon follows Microsoft's pattern of pairing spending increases with concrete demand disclosures (backlog, margin trajectory) rather than just a bigger number.
The Bottom Line
Amazon's Q2 2026 is a genuinely strong quarter with one clean caveat: the headline EPS number is heavily inflated by a one-time Anthropic mark-to-market gain, following the same pattern that's distorted headline earnings at several major companies this earnings season. Strip that out, and the real story is AWS reaccelerating to its fastest growth in over four years while simultaneously expanding margin — the clearest evidence yet, across this entire hyperscaler earnings cycle, that heavy AI infrastructure capex can coincide with both faster growth and better profitability in the same segment, at the same time. The market agreed emphatically, sending shares up more than 8% after hours despite Q3 guidance landing a touch below consensus — proof that, for now, investors are pricing this quarter's demonstrated AWS trend well ahead of any single quarter's cautious-looking forward number.
Amazon.com, Inc. (NASDAQ: AMZN) reported Q2 2026 net sales of $200.6B (+20% YoY) and diluted EPS of $5.75 (+242% YoY, substantially inflated by a $53.4B non-operating gain primarily from its Anthropic investment). AWS grew 37% YoY, its fastest pace in 18 quarters, with operating margin expanding to 39.4%. Trailing-twelve-month free cash flow turned negative for the first time, at −$7.6B, on accelerating capex. Shares rose more than 8% in after-hours trading, touching $255 versus a $235.50 regular-session close, even as Q3 revenue guidance came in modestly below the roughly $204.1B analyst consensus.