Amazon (AMZN): Q2 2026 results, my verdict

2026-07-30 · By Lubin Danilo, founder of Lubin Investment

AMZN: see the full analysis on Lubin Investment

Amazon reported on July 30, 2026 net sales of $200.6 billion (+20%), a quarterly record, with AWS up 37%, its best pace in 18 quarters. But net income of $62.6 billion includes a one-off $53.4 billion gain tied to its Anthropic stake. My quality filter stays cautious (6 out of 10 criteria): here is how I separate the real performance from the exceptional accounting gain.

What just landed: $200 billion in a single quarter, a first

Amazon released its second-quarter 2026 results on July 30, 2026: net sales of $200.6 billion, up 20% year over year from $167.7 billion a year earlier, crossing the $200 billion mark in a single quarter for the first time in its history. AWS, the cloud division, accelerated to $42.2 billion, up 37% year over year, its best growth pace in 18 quarters. AWS operating margin reached 39.4%, with operating income of $16.6 billion versus $10.2 billion a year earlier. Company-wide operating income rose 43% to $27.5 billion, the most reliable measure of the quarter's true business profitability.

An essential honesty note: the reported net income of $62.6 billion ($5.75 per diluted share) includes a $53.4 billion pretax gain tied mainly to Amazon's stake in Anthropic (the artificial intelligence company). This type of gain, required by US accounting rules that mandate marking equity stakes in other companies to market value, corresponds to NO cash actually received: it is an accounting revaluation of the stake's worth, not a check cashed. Operating income of $27.5 billion is therefore the figure to rely on to judge the quarter's real performance, not net income inflated by this one-off gain.

Why my filter stays cautious, at 6 out of 10 criteria

The positive side is real: total sales growth reaches 11.2% a year on average over five years, a solid pace for a company this size, with margins expanding year after year and a negative net cash conversion cycle of 12 days (Amazon collects from customers before paying its suppliers, a sign of negotiating power that funds part of its working capital for free). Net margin comes in at 12.2%, a figure to interpret cautiously this quarter precisely because of the Anthropic gain mentioned above.

The real weak point, and the reason my filter stays cautious, is cash profitability: the free cash flow margin (the money genuinely left after bills AND investments) drops to just 2.1%, and the cash conversion of earnings is only 17%. The mechanism is clear: Amazon is investing considerable sums in the data centers and chips needed to meet AI demand on AWS, capital spending that absorbs nearly all the cash generated elsewhere. Shares outstanding rise slightly (+1.76% a year), a sign of modest dilution from stock-based compensation rather than buybacks.

The price: the highest P/FCF I measure, but a misleading snapshot

Amazon trades at 161 times its annual free cash flow (P/FCF), a multiple sitting at the 98.3rd percentile of its last five years: nearly the most expensive this stock has ever been. My reasonable-buy-price model shows a 96% premium at the current price. Taken at face value, this figure looks alarming.

But this is exactly the kind of situation where you need to look at the trajectory, not the snapshot: current free cash flow is artificially compressed by a massive spike in AI infrastructure investment, not by a deterioration of the underlying business (sales up 20%, AWS up 37%, operating margins expanding). If this capital spending normalizes in coming years once the infrastructure is built, real free cash flow could rebound much faster than the current P/FCF suggests, making today's price look retroactively cheaper than it appears. That is the implicit bet anyone buying Amazon at this level is making: that today's capex is a temporary investment, not a new permanent regime.

The real debate

The whole Amazon thesis comes down to a question of timing and discipline: will the massive AI capital spending translate into a durable acceleration in AWS revenue that justifies the expense, before the market loses patience over the lack of cash generated today? If cloud/AI demand keeps accelerating as this quarter suggests, the thesis strengthens. If capex keeps climbing without matching revenue growth, today's 161x P/FCF becomes much harder to justify.

How I settle it

I stay cautious on Amazon at this price: operational growth is real and impressive, but I would rather wait to see whether capex normalizes and free cash flow rebounds before considering an entry point, rather than bet on a still-uncertain trajectory at a price with no room for error. Separating an excellent operating quarter from a good buy price is exactly what my stock analysis site is built to make objective.

Amazon crosses $200B in quarterly sales for the first time (+20%), AWS accelerates to +37%, its best pace in 18 quarters.
Net income of $62.6B includes a one-off accounting gain of $53.4B tied to Anthropic, with no link to cash received: operating income (+43% to $27.5B) is the figure to rely on.
Free cash flow margin at just 2.1%, weighed down by massive AI infrastructure capex, not by a deteriorating business.
P/FCF of 161x, at the 98.3rd percentile of its own history: the highest I measure, but a misleading snapshot if capex normalizes in coming years.
Verdict: real and impressive operational growth, but I stay cautious until AI capex translates into rebuilt free cash flow.

FAQ

Why is Amazon's $62.6B net income misleading this quarter?

It includes a one-off $53.4 billion accounting gain from revaluing Amazon's stake in Anthropic, required by accounting rules but with no cash actually received. Operating income ($27.5B, +43%) better reflects the quarter's true performance.

Why is Amazon's free cash flow margin so low (2.1%)?

Because Amazon is investing heavily in the data centers and chips needed to meet AI demand on AWS. This capex absorbs nearly all the cash generated elsewhere, without signaling a deterioration of the underlying business.

Should you buy Amazon stock after these results?

My quality filter stays cautious (6/10) and my model shows a 96% premium at the current P/FCF, the highest in my covered universe. I would rather wait for capex to normalize before reconsidering. This is not personalized investment advice, do your own research.

Is AWS really accelerating?

Yes: 37% growth this quarter, its best pace in 18 quarters, with a 39.4% operating margin. It is the most positive signal of the quarter, largely driven by demand for AI infrastructure.

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).