Amazon

Amazon runs three main businesses. The first is online retail in North America and in other countries. Amazon sells products directly to customers, and it lets other sellers list products on its site for a fee. In Q2 2026, Amazon's online stores had sales of $70.4 billion, and fees from other sellers were $46.8 billion.

The second business is Amazon Web Services, or AWS. AWS rents cloud computing, storage and AI infrastructure to other companies, and it designs its own chips, Graviton and Trainium. In Q2 2026, AWS had sales of $42.2 billion and operating income of $16.6 billion. This was more than half of Amazon's total operating income of $27.5 billion.

The third business is advertising, mostly sponsored product ads in Amazon's store. Advertising sales were $19.8 billion in Q2 2026, 26% more than a year earlier. Amazon also sells Prime subscriptions. It is building Amazon Leo, a satellite internet service, and Zoox, a robotaxi service.

It holds large stakes in two AI companies, Anthropic and OpenAI.

The market discounts Amazon mainly because of its record AI spending. Amazon now plans about $220 billion of cash capital spending in 2026, up from about $200 billion in its February plan. This spending made free cash flow negative over the 12 months to June 30, 2026, and Amazon now borrows to pay for it. Investors fear that the new data centers will not earn a strong return quickly.

Large non-cash gains on the Anthropic stake also make net income hard to read: they were most of the $53.4 billion of non-operating income in Q2 2026. Two antitrust cases add a second fear, because they target the marketplace and the ad auctions, two of Amazon's most profitable businesses. For the gap to close, AWS must turn its $496 billion backlog into revenue at high margins. AWS growth rose from 28% in Q1 2026 to 37% in Q2, and its operating margin rose from 37.7% to 39.4%.

AWS growth must stay near this level, and free cash flow must turn positive when the spending growth slows. The antitrust cases must also end without forced changes to the marketplace or the ad business. The Q3 2026 report, expected about October 29, 2026, and the Q4 report in early 2027, with the 2027 spending plan, are the next tests. The FTC marketplace trial starts on March 29, 2027.

If AWS keeps its growth and margins and free cash flow starts to recover, the discount can close over the next four to six quarters.

1. Oct 29, 2026 · est.Pending

   Q3 2026 results: AWS growth, margin and backlogAWS growth near the Q2 level of 37%, an operating margin near or above 39.4%, and a backlog that keeps growing pass; a margin drop or a stall in AWS growth fails.
2. Nov 2026 · est.Pending

   EU decision on AWS as a Digital Markets Act gatekeeperNo designation, or a designation with rules that do not change AWS pricing, passes; rules that force large changes to AWS contracts or prices fail.
3. Dec 2026 · est.Pending

   Amazon Leo starts initial internet serviceInitial paid service for customers in 2026, as Amazon said in July, passes; a delay into 2027 fails.
4. Feb 2027 · est.Pending

   Q4 2026 results and 2027 capital spending planFree cash flow that turns toward positive with steady AWS growth passes; a larger 2027 capex plan with still negative free cash flow fails.
5. Mar 29, 2027Pending

   FTC marketplace monopoly trial starts in SeattleA settlement or trial progress with no forced change to the marketplace or fees passes; a ruling or settlement that forces large business changes fails.

Every passed and failed checkpoint across all picks

Amazon now borrows to pay for AI data centers, and large stakes in AI companies sit on its balance sheet. While free cash flow stays negative, each new step of AI spending needs more borrowing until the new capacity earns revenue. Read more

• Amazon plans about $220 billion of cash capital spending in 2026, mostly for AI data centers and chips. Free cash flow was an outflow of $7.6 billion for the 12 months to June 30, 2026. Since then, Amazon has borrowed more and paid $21.3 billion to OpenAI. If AI demand grows slower than planned, or AI computing prices fall, this spending will not earn the expected return, and the debt will stay.
• Amazon faces two FTC cases. The marketplace monopoly case goes to trial on March 29, 2027. The ad auction case, filed on August 31, 2026, says that Amazon took tens of billions of dollars from advertisers. A loss in either case could force changes to the marketplace or to the ad business, two of Amazon's most profitable businesses, and could bring large payments.
• A large part of AWS's future AI revenue comes from two customers, Anthropic and OpenAI. In 2026, OpenAI added $100.0 billion over 8 years to its AWS commitment, and Anthropic added more than $100.0 billion over 10 years. AWS's total backlog was $496 billion at June 30, 2026. The risk in current revenue is smaller. Press reports said that the AWS CEO gave the share of AWS revenue from its largest customer as a single-digit percentage. Amazon also owns large stakes in both companies. At June 30, 2026, Amazon held Anthropic preferred stock with a value of $92.5 billion, Anthropic convertible notes with a value of $97.9 billion and OpenAI preferred stock with a value of $28.7 billion. These values are estimates and can change quickly. A fall in Anthropic's value would cause large losses in net income. A slowdown at either company would hurt AWS revenue at the same time.
• AWS grows slower than its two main rivals. In the quarter to June 30, 2026, AWS grew 37%, Microsoft Azure 43% and Google Cloud 82%. AWS keeps losing share of the cloud market while this continues. Microsoft and Google also sell their own AI models, and AWS depends more on outside models.
• The retail business has thin margins. In Q2 2026, the operating margin was 7.9% in North America and 4.1% in other countries. Weaker consumers, tariffs or higher delivery costs can remove much of that profit. Customers have also sued Amazon about refunds of tariffs that it passed on in its prices.
• New businesses need large amounts of money before they earn a profit. Amazon Leo must have half of its satellites in orbit by July 30, 2028, under its FCC license. Amazon also pays about $10.9 billion, including debt, for Globalstar and builds the Zoox robotaxi service. In Europe, a gatekeeper decision on AWS under the Digital Markets Act would add rules to how AWS deals with customers.

• October 9, 2026Judge John Chun refused Amazon's request to move the FTC marketplace monopoly trial to June 2027. The trial stays set for March 29, 2027, in Seattle.
• October 8, 2026Amazon said that it has built more than 1,000 Amazon Leo satellites. These satellites are not all in orbit. The last Amazon Leo launch was on July 2, 2026.
• October 8, 2026AWS CEO Matt Garman said on the a16z podcast that AWS does not put all of its capacity into one customer. Press reports said that he also gave the share of AWS revenue from its largest customer as a single-digit percentage. The reports did not name the largest customer. Amazon does not report revenue by customer.