The Numbers Come First
Amazon Web Services generated $42.2 billion in revenue in the second quarter of 2026, up 37% from $30.9 billion in the same period a year ago — the unit's fastest growth rate in 18 quarters. AWS operating income reached $16.6 billion, a 64% year-over-year jump from $10.2 billion, on a margin of 39.4%, up from 32.9% a year earlier.
CEO Andy Jassy framed the scale plainly on Thursday's earnings call: 'AWS is now a $169 billion dollar annualized revenue run rate business, which, for perspective, would place it 24th on the Fortune 500 list if it was a standalone company.'
Across all Amazon businesses — stores, advertising, Prime, devices, and cloud — net sales rose 20% to $200.6 billion, compared with $167.7 billion a year earlier. Operating income surged to $27.5 billion from $19.2 billion. Net income hit $62.6 billion, or $5.75 per diluted share, versus $18.2 billion, or $1.68 per share, a year ago. The company noted that the net-income figure includes $53.4 billion in non-operating income primarily from Amazon's investments in Anthropic.
Advertising, a segment that generated $15.7 billion a year ago at 22% growth, accelerated to 26% year-over-year growth in Q2. AWS's customer backlog — agreements representing future revenue — grew to $496 billion.
The Capital Commitment
Amazon now expects to spend $220 billion in capital expenditures in 2026, up from a prior estimate of $200 billion, driven by higher memory costs. Even at that elevated level, Jassy told investors, Amazon still won't 'have enough capacity to meet all the demand we have in 2026. And I believe this dynamic will also be true in 2027 too.'
The investment is showing up directly in cash flow. Free cash flow flipped to negative $7.6 billion, compared with a positive inflow of $18.2 billion a year ago. Amazon attributed the reversal to a $66.1 billion year-over-year increase in equipment purchases reflecting AI investments. AWS property and equipment stood at $223 billion in Q1, up from $190 billion the quarter before.
Amazon's stock jumped more than 9% in after-hours trading Thursday.
Why AWS Is Winning
Jassy pointed to two structural advantages. First, 85% of global IT spending remains on-premises. 'That equation is going to flip in the next 10 to 20 years,' he said, with AWS 'winning the lion's share' of enterprise cloud migration plans. Second, as companies move inference workloads to production, they want them near existing data — and 'so much more of it lives in AWS than anywhere else.'
Customer spending on Bedrock, Amazon's platform for accessing AI models from Anthropic, Meta, and OpenAI, exceeded in Q2 what was spent across all prior quarters combined, according to an analyst question on the call. AWS remains on pace to double its power capacity by the end of 2027 compared with 2025.
CEO Times Take
This is what free enterprise looks like at full throttle. Amazon is not waiting for a regulator to approve its next data center or a government committee to validate its AI roadmap. It is deploying $220 billion of private capital because the market is signaling, loudly, that it cannot build fast enough. Negative free cash flow is not a warning sign here — it is the cost of compounding at 37%.
The contrast with state-directed industrial policy could not be sharper. Capital is flowing where returns are clearest, margins are expanding even as spending accelerates, and the backlog stands at $496 billion. The market has already voted.
