Amazon delivered a strong quarter, anchored by faster fulfilment and a lower cost-to-serve that reinforced its market leadership. Prime continues to deepen customer stickiness by bundling essential e-commerce services with digital entertainment. Meanwhile, AWS remains a high-growth engine, capturing the robust demand for AI infrastructure.
| Financial indicator | Q1 2025 (US$ million) | Q1 2026 (US$ million) | Percentage change |
| Revenue | 155,667 | 181,519 | +16.6% |
| North America | 92,887 | 104,143 | +12.1% |
| International | 33,513 | 39,789 | +18.7% |
| AWS | 29,267 | 37,587 | +28.4% |
| Operating income | 18,405 | 23,852 | +29.6% |
| North America | 5,841 | 8,267 | +41.5% |
| International | 1,017 | 1,424 | +40.0% |
| AWS | 11,547 | 14,161 | +22.6% |
| Net income | 17,127 | 30,255 | +76.7% |
| Operating cash flow (TTM) | 113,903 | 148,531 | +30.4% |
Revenue grew 15% excluding the 180-basis-point favourable foreign exchange tailwind. The overall operating margin expanded to from 11.8% in Q1 2025 to 13.1% in Q1 2026, which is a record high, driven by expansions in the margins of the North America and International segments. Revenue from the International segment grew 11% excluding the favourable impact of foreign exchange.
AWS recorded the fastest growth rate in the recent 15 quarters, driven by demand for both core and AI services. Its revenue increased US$2.o billion sequentially from Q4 2025, the largest Q4-to-Q1 revenue jump in history. The segment now has an annualised revenue run rate of US$150 billion.
Amazon anticipates a US$1 billion year-on-year cost increase in the North America segment, driven by Amazon LEO. Additionally, higher transportation costs from fuel inflation will be partially mitigated by the newly implemented Fulfilment by Amazon fees and logistics surcharge.
Capital expenditures (CapEx) amounted to US$43.2 billion during the quarter, driven by investments in AWS and GenAI. Revenue in Q2 2026 is expected to range between US$194 billion and US$199 billion, driven by Prime Day sales despite a 10-basis-point foreign exchange headwind. Operating income is forecast to hover between US$20 billion and US$24 billion.
Online and physical stores
Overall units grew 15% year-on-year and continued to outpace logistics costs. Outbound shipping and fulfilment expenses grew 12% and 9% respectively excluding the impact of foreign exchange. In Q1 2026, Amazon reported a year-on-year decline in average selling prices across its product catalogue. Over 1 billion items were delivered same day or overnight in 2026.
Amazon is betting on agentic commerce by leveraging its agentic AI shopping assistant, Rufus. According to CEO Andy Jassy, third-party AI agents currently struggle with pricing accuracy and shopping history. On the other hand, Rufus monthly active users and engagement surged 115% and 400% year-on-year respectively. Early monetisation is ongoing with the newly introduced sponsored products and brand prompts.
Whole Foods Market currently has more than 550 stores and another 100 stores will be added in the next few years. Amazon is now the second largest grocer in the US with gross revenue of over US$150 billion in 2025. Perishables dominate customers’ shopping carts and are a key driver of customer stickiness and frequency. Same-day perishable shoppers build baskets nearly 3x larger than other shoppers.
Amazon expanded its Amazon Now 30-minute delivery service to nine countries including India where orders increased 25% month-on-month while Prime members tripled their shopping frequency.
Third-party seller services
During the quarter, third-party sellers recorded robust sales growth across the US, Europe, and Brazil where seller fees were lowered. These sellers continue to expand its broad product offerings and contribute to competitive pricing.
Advertising services
Revenue from advertising services increased 23.9% year-on-year to US$17.2 billion, driven by its full-funnel offering. Amazon is using AI to help smaller brands generate ads, expanding its advertiser base. It is also monetising the frequent, multi-turn customer conversations enabled by Rufus.
Subscription services
Prime Video is a driver of Prime sign-ups and renewals and is profitable on its own. It continues to enhance its entertainment and live sports offerings. Prime members also tend to shop more than non-Prime members.
AWS
AWS continues to accelerate its growth, matching the pace it set when it was half its current size. The AI business is scaling nearly 260 times faster than the original cloud business, surpassing an annualised revenue run of US$15 billion in just three years.
Amazon’s silicon division is now one of the top three data centre chip businesses globally. Revenue grew nearly 40% sequentially and triple-digits year-on-year, reaching an annualised run rate above US$20 billion.
Amazon continues to partner with NVIDIA to offer industry-standard GPUwhile aggressively scaling its internal chips to offer customers superior price-performance and choice. Amazon expects to save tens of billions in annual CapEx while improving operating margins by several hundred basis points.
The Graviton CPU is utilised by 98% of top EC2 customers, while the Trainium AI line has secured over US$225 billion in revenue commitments from leaders like OpenAI and Anthropic. Trainium2 offers 30% better price-performance than comparable GPUs, with Trainium3 delivering an additional 30%–40% gain over its predecessor.
These commitments and performance benchmarks justify the current high CapEx. While front-loaded CapEx spending temporarily impacts free cash flow, these assets have long useful lives (over 30 years for data centres), ensuring long-term returns.
Amazon Bedrock now serves 80% of the Fortune 100 companies as customer spend surged 170% sequentially. The platform continues to expand its frontier models by adding OpenAI’s GPT-5.4 recently while version 5.5 will be launched soon.
AWS customers continue to migrate from on-premises infrastructure to AWS. CFO Brian Olsavsky sees a strong correlation between AI spend and core growth. While AI revenue posted year-on-year triple-digit growth, demand for core services continues to increase.
Key analyst questions
AWS backlog totalled US$364 billion during the quarter excluding the recent deal with Anthropic that is valued at above US$100 billion. Amazon is preparing to sell full Trainium hardware racks to external customers in the near future.
According to Jassy, Amazon Leo is a multi-billion-dollar revenue low-Earth orbit satellite network business that mirrors the early high-capital, high-return model of AWS. The service is set to launch commercially in Q3 2026. Amazon plans to launch multiple satellite constellations in 2026 and 2027. Amazon also recently acquired Globalstar to complement Amazon Leo by launching direct-to-device services.
Jassy added that the cost of components, particularly memory, has skyrocketed. Amazon remains capacity-constrained. This accelerates the transition from on-premises infrastructure to the cloud.
AI demand has shifted from basic cost avoidance to customer experience reinvention. Internally, with the help of agentic coding, a 40-person, year-long project was replaced with just five engineers in 65 days. Jassy thinks current AI investment is important for business survival. Every business function and consumer interface will be rebuilt from scratch over the next few years.
The fifth perspective
Amazon’s push for delivery speed has transformed it from a retail option into a daily utility, driving higher purchase frequency and deeper customer loyalty. By integrating generative AI across its infrastructure, Amazon is leveraging AWS to turn this technological shift into a structural advantage that scales both its cloud and retail ecosystems.
