Amazon delivered another solid quarter with notable Amazon Web Services (AWS) growth, stemming from demand from both AI and non-AI. The company’s financial performance justified the high investments, driven by continued cloud migrations and expanding enterprise adoption.
| Financial indicators | Q2 2025 (US$ million) | Q2 2026 (US$ million) | Percentage change |
| Revenue | 167,702 | 200,606 | +19.6% |
| North America | 100,068 | 116,177 | +16.1% |
| International | 36,761 | 42,197 | +14.8% |
| AWS | 30,873 | 42,232 | +36.8% |
| Operating income | 19,171 | 27,461 | +43.2% |
| North America | 7,517 | 9,123 | +21.4% |
| International | 1,494 | 1,717 | +14.9% |
| AWS | 10,160 | 16,621 | +63.6% |
| Net income | 18,164 | 62,647 | +244.9% |
| Operating cash flow (TTM) | 121,137 | 161,403 | +33.2% |
Revenue increased 19.6% year-on-year to US$200.6 billion in Q2 2026, driven by AWS as well as the shift of Prime Day from Q3 to Q2 for most of the large countries. Operating income growth benefited from US$600 million worth of tariff-related refunds in U.S. and a fair value change in energy contracts secured amounting to approximately US$600 million.
North America segment operating margin improved from 7.5% to 7.9% quarter-on-quarter in Q2 2026. International segment operating margin remained stable at 4.1%.
Despite heavy investments, AWS operating margin grew from 32.9% to 39.4%. The AWS operating margin would have grown to 39.1% instead excluding the gain from the energy contracts mentioned. AWS margin will continue to fluctuate from time to time.
AWS is spending heavily upfront to build multiple data centres simultaneously. These facilities take around two years to build but can operate for more than 30 years, creating a temporary cash crunch. Servers, meanwhile, typically have a payback period of less than three years but can last up to six years. Over the long term, the financial returns could mirror those achieved during the highly profitable early days of cloud computing.
Capital expenditures (CapEx) totalled US$53.1 billion in Q2 2026, driven by investments in AWS and generative AI. CapEx was partly funded by a debt issue during the year. CapEx guidance in 2026 has been revised upwards from US$200 billion to approximately US$220 billion, driven by higher memory costs. Yet, the company remains capacity-constrained at least until 2027.
Revenue in the September quarter is expected to range between US$197 billion and US$202 billion, partially offset by 0.8% of foreign exchange headwind. The company will likely record a sequential deceleration, due to the shift of Prime Day as mentioned. Excluding the impact of Prime Day, revenue in Q3 2026 will have grown by another 4%. Operating income in Q3 2026 is anticipated to hover between US$22.5 billion and US$26.5 billion.
Online and physical stores
Amazon is the second largest grocer in the U.S. with gross merchandise sales of over US$150 billion in 2025. It continues to anchor on more selections, lower prices, and faster delivery. The number of worldwide paid units grew 17% year-on-year across perishables and non-perishables despite heightened transportation costs and a shortage of qualified commercial truck drivers. Excluding these factors, worldwide unit growth outpaced shipping cost growth. According to third-party research firm, Profitero, Amazon product prices were 14% lower than other retailers on average.
Third-Party Seller Services
Amazon recently launched Amazon Supply Chain Services to provide third-party supply chain and logistics services to enterprise clients, thereby opening up new B2B revenue streams by leveraging Amazon’s fulfilment network.
Advertising services
- Revenue from Amazon Ads increased 26.2% year-on-year to US$19.8 billion.
- Sponsored Products remains the largest offering and a key driver of growth, boosted by agentic and conversational shopping experiences. Shoppers clicking sponsored prompts convert at a 48% higher rate and spend 21% more on average.
Subscription services
The number of Prime members grew by a double-digit percentage year on year. Alexa+ has expanded to Germany, Austria, France, and Brazil and is driving business momentum. In the U.S., customers who use Alexa for shopping spend, on average, over 40% more per order, while those who try Alexa+ sign up for Prime at a rate nearly 25% higher than non-users.
AWS
AWS growth accelerated for the fifth consecutive quarter, with revenue increasing 12.4% sequentially. In Q2 2026, the segment recorded its strongest year-on-year revenue growth since Q4 2021, and its revenue has doubled since then. AWS’s revenue backlog surged by a triple-digit percentage to US$496 billion, while its annualised revenue run rate reached US$169 billion. Management expects the run rate to eventually exceed US$1 trillion while generating strong free cash flow and returns.
The annual revenue run rates of both the chip and AI businesses surpassed US$25 billion, with each recording triple-digit percentage growth year on year.
According to management, AI growth is also driving demand for core services that run on CPUs, particularly for post-training and agent workloads. AWS is positioning Trainium for AI workloads and Graviton for CPUs, with major AI companies including Anthropic and OpenAI making multi-year, multi-gigawatt Trainium commitments. Graviton is broadly adopted by large corporate customers while AWS also offers Nvidia GPUs.
Key analyst questions
CEO Andy Jassy emphasizes that AWS can succeed without building its own frontier model by offering customers access to third-party and open-source options through Amazon Bedrock, where customer spending recently surpassed all prior quarters combined. At the same time, Amazon is developing its own frontier models to optimise long-term cost performance. While companies may not build massive frontier models themselves, they are increasingly leveraging their own data and adopting smaller custom models.
High demand for AI positions AWS for strong long-term growth in enterprise workloads and AI training. This growth is supported by capacity booked through 2028 and a multi-billion-dollar custom chip business. New agreements incorporate higher input costs into customer pricing, helping AWS manage inflation in components such as memory and storage.
The fifth perspective
Overall, Amazon appears well positioned for continued growth, supported by AWS’s leading market position, strong growth momentum, and high operating margins. Meanwhile, its online retail and grocery businesses should remain sticky, as Amazon continues to offer consumers a compelling combination of competitive prices, fast delivery, and a broad product selection. Together, these strengths reinforce its ecosystem, deepen customer loyalty, and provide multiple avenues for sustainable long-term growth.
