Amazon.com Inc.

Amazon’s Q2 strength (consolidated): big top-line growth + strong operating leverage - Revenue: $200.6B, +20% YoY (and +36.7% YoY for AWS). - Operating income: $27.5B, +43% YoY. - Q3 net sales outlook: $197B–$202B (guidance reflects sequential deceleration mostly from Prime Day timing shift + FX headwind). - Q3 operating income outlook: $22.5B–$26.5B. - Notable items affecting comparability: ~$1.2B of expense reductions in Q2 from (1) tariff-related refunds (~$600M) and (2) energy contract derivative fair value benefit (~$600M, mainly AWS-related, unrealized).

AWS performance is accelerating and management is confident on the margin path - AWS revenue: $42.2B, +36.7% YoY, 5th straight quarter of accelerating growth (fastest in 18 quarters). - AWS annualized revenue run rate: $169B (framed as ~Fortune 500 scale if standalone). - AWS backlog: $496B, growing triple digits YoY. - AWS operating income: $16.6B; AWS operating margin up (+650 bps YoY, and +520 bps excluding the derivative accounting gain). - CFO emphasized drivers: disciplined efficiency/capacity optimization and fixed-cost management (but said margins will fluctuate with mix and investment levels).

CapEx expectations rise further, but management says the ROIC/free-cash-flow cycle is visible - Q2 cash CapEx: $53.1B (primarily AWS + generative AI). - Updated 2026 cash CapEx outlook: ~$220B (raised from ~$200B prior), with the increase attributed to higher memory costs. - Management explicitly expects capacity constraint: even at ~$220B, they won’t meet all demand in 2026, and they see a similar dynamic into 2027. - Capital cycle narrative investors should note: - Data centers: long “startup” period (spent ~2 years before monetization) but 30+ year monetization. - Servers/network: purchased closer to deployment; ~<3 years average break-even. - Result: once servers are monetized, management expects strong free cash flow and attractive ROIC, after initial headwinds.