Amazon Q2 revenue hits $200.6B on AWS surge; CapEx raised to $220B

Amazon reported Q2 2026 revenue of $200.6 billion, representing 20% year-over-year growth, with operating income of $27.5 billion, up 43% year over year. Net income reached $62.6 billion, or $5.75 per diluted share, though this figure was significantly boosted by a $53.4 billion non-operating pre-tax gain from the valuation of Amazon's investment in Anthropic. CEO Andy Jassy emphasized that "Q2 was another very strong quarter for Amazon," with AWS leading the acceleration.

AWS delivered revenue of $42.2 billion, growing 36.7% year over year, marking the fastest growth in 18 quarters. The division added over $4.6 billion in revenue quarter-over-quarter, about 80% more than its largest increase ever. AWS now operates at a $169 billion annualized revenue run rate, which would rank 24th on the Fortune 500 if it were a standalone company. The AWS backlog reached $496 billion and is growing at a triple-digit percentage rate year over year, driven by customers committing to multiyear cloud and AI contracts. AWS operating income was $16.6 billion with an operating margin of 39.4%, reflecting what the company characterized as "disciplined efficiency gains and server capacity optimization." When excluding a one-time energy derivative accounting gain, the underlying operating margin improvement was 520 basis points.

The company's custom chips business generated an annualized revenue run rate exceeding $25 billion, with triple-digit percentage growth driven by Trainium AI accelerators and Graviton CPUs. Graviton adoption is particularly strong: 98% of the top 1,000 EC2 customers now utilize Graviton CPUs, with Graviton5 adoption growing nearly twice as fast as the previous generation. Graviton chips offer "up to 30%-40% better price performance" than competing processors. Separately, generative AI revenue run rate exceeded $25 billion with triple-digit growth, as enterprise customers move inference workloads into production. The company added OpenAI's GPT-5.6 and Anthropic's Claude Opus 5 to its Amazon Bedrock platform, with customers spending more on Bedrock in Q2 than in all prior quarters combined.

Beyond AWS, Amazon's retail and advertising segments demonstrated steady momentum. Advertising revenue reached $19.8 billion, a 26% increase year over year, led by Sponsored Products and expansion into Prime Video ads. Online Stores revenue grew to $70.4 billion, up 15% year over year, as delivery speeds reached record levels in the first half of the year. Worldwide paid units grew 17% year over year, with 61% of units sold by third-party sellers. Shipping costs rose to $27.9 billion, representing a 19% increase year over year due to fuel inflation and higher line haul rates. North America segment revenue was $116.2 billion, up 16% with an operating margin of 7.9%, while International segment revenue reached $42.2 billion, growing 15% year over year excluding foreign exchange.

Specialized segments also showed strong growth. Monthly active perishables customers increased 50% since the beginning of the year, with fresh items making up six of the top 20 best sellers. Customers ordering perishables average "three times more units per order," a benefit Jassy attributed to same-day facilities. Amazon Pharmacy new customer counts more than doubled in the first six months of 2026, and same-day prescription deliveries increased nearly fivefold. Alexa for Shopping reached over 350 million customers in the last 12 months, with active users nearly doubling year over year. Amazon Now expanded to nine countries and over 250 cities, with gross sales and units sold growing 80% quarter over quarter.

Amazon announced a significant increase in capital expenditure guidance, raising the 2026 CapEx target to approximately $220 billion from a previous $200 billion estimate. The company cited higher costs for memory and increased capacity requirements as drivers of the increase. Jassy noted that despite spending $220 billion in CapEx, "we will still not have enough capacity to meet all the demand we have in 2026." He also projected that AWS has the potential to eventually become "a trillion-dollar annual revenue business" as enterprise IT spending continues shifting to the cloud. CFO Brian Olsavsky flagged "heightened transportation costs driven by fuel inflation from the conflict in the Middle East and higher line haul rates from driver capacity limitations," which create pressure on fulfillment expenses. Jassy indicated that the company will face near-term "free cash flow headwinds" until data centers currently under construction can be fully monetized through server utilization.

Looking ahead, Amazon guided Q3 2026 revenue to $197 billion to $202 billion, assuming an 80 basis point unfavorable impact from foreign exchange and a timing shift for Prime Day. Q3 operating income is expected to range from $22.5 billion to $26.5 billion, compared with $17.4 billion in the third quarter of 2025. The company also announced plans to more than double its fleet of robotic arms, such as Cardinal and Sparrow, during 2026 to further automate fulfillment processes. Amazon's Project Kuiper (Leo) low Earth orbit satellite network has reached approximately 400 satellites in orbit, which the company confirmed is sufficient to begin initial satellite internet service later in 2026.