Q2 earnings beat on AWS acceleration
Amazon reported second-quarter net sales of $200.6 billion, up 20% year over year, with operating income of $27.5 billion versus $19.2 billion a year earlier. AWS revenue rose 37% to $42.2 billion, described by the company as its fastest growth in 18 quarters, with the cloud unit posting operating income of $16.6 billion on a 39% margin, up from 33% a year earlier. Adjusted earnings came in at $1.97 per share, above the $1.82 analysts expected. The report lifted Amazon shares about 15% in trading following the July 30 results, with CEO Andy Jassy calling AWS "booming" and noting that its AI business and internally designed chip operations each surpassed a $25 billion annual revenue pace.
Capital spending lifted to $220 billion for 2026
Jassy told analysts Amazon now expects to spend about $220 billion on capital projects in 2026, up from the roughly $200 billion it projected earlier in the year, attributing the revision to higher memory prices. Quarterly capital expenditures alone reached $54.2 billion, up from $32.1 billion in the same period a year earlier. Jassy said the company "will still not have enough capacity to meet all the demand we have in 2026" and that demand already booked for 2028 was "striking." The AWS backlog of contracted but not-yet-live work reached $496 billion in the quarter. The spending increase follows Alphabet raising its own spending ceiling to $205 billion after reporting an 82% jump in Google Cloud revenue, and Microsoft's 43% gain in Azure revenue for its fiscal fourth quarter.
Balance sheet under strain as debt nearly doubles
The heavier capex pushed Amazon's trailing twelve-month free cash flow into negative territory at an outflow of $7.6 billion, compared with an inflow of $18.2 billion a year earlier. Long-term debt nearly doubled in six months, climbing from $65.6 billion at the end of December 2025 to $128.9 billion on June 30, with quarterly interest expense more than doubling to $1.3 billion. Jassy defended the outlay, arguing that data center capital is spent roughly two years before servers can be monetized and that "at this level of spend and higher, we have clear line of sight to strong financial returns," with servers breaking even in a little less than three years and data centers operating for 30 years or more. Second-quarter net income of $62.6 billion included a $53.4 billion non-operating gain that Amazon said was "primarily from our investments in Anthropic"; the company has not sold any of that stake, so none of the gain is cash it can spend.
AI strategy reset with AGI Lab closure and Nova lineup cuts
Amazon is narrowing its AI ambitions. The company has shut its San Francisco AGI Lab, which was created in late 2024 around talent acquired from AI startup Adept, and has begun deprecating several flagship Nova models, including Nova Premier, Nova Omni, Nova Reel and Nova Canvas. Internal sources described those systems as moving to a "keep the lights on" status, meaning they remain available to existing enterprise clients but will no longer receive active development. Resources and engineering priorities are being consolidated under a Frontier Model Research initiative led by AI roboticist Pieter Abbeel, with a new foundation model expected to debut at AWS re:Invent later this year. An Amazon spokesperson said model evolution reflects "standard lifecycle management," while the company separately announced a $1 billion AWS Forward Deployed Engineering group to embed engineers with customers building agentic AI systems.
Consumer lawsuit targets seafood sustainability claims
On August 1, Amazon was sued in Seattle federal court in a proposed class action accusing the retailer of greenwashing. Consumers said labels such as "dolphin safe," "responsibly sourced," "sustainable," "wild caught" and "MSC Certified Sustainable Seafood" misled buyers into believing Amazon's seafood sourcing causes minimal harm to oceans, even though most fishing vessels are not publicly tracked and some disable transponders. The lawsuit targets dozens of tuna, salmon and other seafood products under brands including Bumble Bee, Chicken of the Sea, StarKist and Amazon's own 365 by Whole Foods Market, and seeks compensatory and punitive damages for alleged violations of Washington consumer protection laws. The parents of the three branded defendants, Taiwan's FCF, Thai Union Group and South Korea's Dongwon Industries, were not named in the complaint.
What to watch next
Amazon has guided to third-quarter revenue of $197 billion to $202 billion, below the $204.1 billion LSEG analyst estimate, citing difficult year-over-year comparisons after Prime Day moved from July to June. Operating income is forecast at $22.5 billion to $26.5 billion against StreetAccount estimates of $24.92 billion. The next material checkpoints are AWS re:Invent, where Amazon has signaled a new foundation model from the Frontier Model Research team is expected, and any further disclosure on how the AGI reorganization affects hiring and remaining Nova roadmap commitments.
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