- Price
- $249.15 → $262.43(+5.3%)
- Discount
- 16.9% → 12.5%(−4.4 pts)
- About
- Amazon runs twothree 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 produces mosthad sales of $42.2 billion and operating income of $16.6 billion. This was more than half of Amazon's profittotal 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.
- Thesis
- The market discounts Amazon mainly because of its record AI spending. Amazon now plans to spend about $220 billion of cash capital spending in 2026 on AI data centers and chips, up from about $200 billion in its February plan. This spending pushedmade free cash flow negative over the 12 months to June 30, 2026, and Amazon now borrows to pay for it. Investors fear that the spendingnew data centers will not earn a strong return quickly. TheyLarge non-cash gains on the Anthropic stake also worry that pendingmake net income hard to read: they were most of the $53.4 billion of non-operating income in Q2 2026. Two antitrust cases could force costly changes toadd a second fear, because they target the marketplace and the ad auctions, two of Amazon's most profitable businesses, its ad auctions and its marketplace. For the gap to close, AWS operating margins must keep expanding. The largeturn its $496 billion backlog of signed cloud contracts must also keep converting into revenue at high margins. AWS operating margin already reached 39.4growth rose from 28% in Q2Q1 2026 to 37% in Q2, upand its operating margin rose from about 3337.8% a year earlierto 39. Its contract backlog jumped by $132 billion in one quarter3%. AWS growth must stay near this level, to $496 billionand free cash flow must turn positive when the spending growth slows. This shows real demand already exists forThe antitrust cases must also end without forced changes to the new capacitymarketplace or the ad business. A new FTC advertising lawsuitThe Q3 2026 report, filed in Augustexpected about October 29, 2026, adds to an existing FTC marketplace monopoly case set for trialand the Q4 report in early 2027, with the 2027 spending plan, are the next tests. Neither case will resolve quickly. Amazon is expected to report Q3 2026 resultsThe FTC marketplace trial starts on OctoberMarch 29, 20262027. That report should show whetherIf AWS keeps its growth and margins and backlog conversion keep improving. If they dofree cash flow starts to recover, and the antitrust cases do not force major business changes before their 2027 trial dates, the discount can close over the next four to six quarters.
- Risks
- Amazon's free plans about $220 billion of cash flow turned negativecapital spending in 2026 because of heavy, mostly for AI capital spendingdata centers and chips. Full-year capital spending guidance is now aboutFree cash flow was an outflow of $2207.6 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.
The FTC, and 22 states sued Amazon in August 2026 over its advertising auction practicesthe debt will stay.
Amazon also faces a separatetwo FTC cases. The marketplace monopoly case against its marketplace, set forgoes to trial inon 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.
The FTCA large part of AWS's future AI revenue comes from two customers, Anthropic and 22 states sued Amazon in AugustOpenAI. In 2026, alleging it overcharged advertisersOpenAI added $100.0 billion over 8 years to its AWS commitment, and Anthropic added more than $20100.0 billion since 2019 by secretly overriding its stated second-price ad auctionsover 10 years. This is separate from the existing FTC marketplace monopoly case and adds legal risk to AmazonAWS's advertising business specificallytotal 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, its stakes in private companies had a value of $122.3 billion, mostly Anthropic and OpenAI preferred stock. 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 capacity growthmodels, and AWS depends partlymore on a small number of large partnersoutside models.
The retail business has thin margins. In Q2 2026, including Anthropicthe operating margin was 7.8% in North America and 4.0% in other countries. Weaker consumers, whichtariffs or higher delivery costs can remove much of that profit. Customers have also sued Amazon has invested billionsabout refunds of dollarstariffs that it passed on in its prices. If a
New businesses need large partner's growth slowsamounts of money before they earn a profit. Amazon Leo must have half of its satellites in orbit by July 30, or it shifts spending to another cloud provider2028, AWS's return onunder its new capacityFCC license. Amazon also pays about $11.6 billion for Globalstar and builds the Zoox robotaxi service. In Europe, a gatekeeper decision on AWS under the Digital Markets Act would sufferadd rules to how AWS deals with customers.
- Balance sheet
- Cash: $123.0B
Debt: $133.0B
Net debt: $10.0B
Interest cover: 24×
Ratings: S&P AA, Fitch AA-, Moody's A1 (stable outlook)
Amazon now borrows to pay for AI data centers, and large stakes in AI companies sit on its balance sheet. AtWhile free cash flow stays negative, each new step of AI spending needs more borrowing until the new capacity earns revenue. Debt is the face value of long-term debt at June 30, 2026, up from $68.8 billion at December 31, 2025. Most of it hadwas $132.1 billion of unsecured senior notes at the parent. This is up from $68.8 billion face value of long-term debt at December 31, 2025. ItAmazon also had $109.8 billion of operating and finance lease liabilities and $9.3 billion of financing obligations. Against this, it had $123.0 billion of cash andCash includes marketable securities. Free cash flow was negative $7.6 billion for the 12 months to June 30, 2026. Purchases of property and equipment of $169.0 billion, net of proceeds and incentives, used more than all of the $161.4 billion operating cash flow. Operating income of $51.3 billion inInterest cover is for the first half of 2026 covered interest expense of $2.1 billion about 24 times. The $20.0 billion of revolving credit facilities and, the $30.0 billion commercial paper programs and a $17.5 billion term loan signed in June 2026 were undrawn. The ratings are AA at S&PAfter June 30, AA- at FitchAmazon sold $25.0 billion of notes on July 9 and A1 at Moody's£4.25 billion of notes on September 14, and it paid the last $21.3 billion of its OpenAI investment. In February 2026, Moody's moved its outlook back to stable because of higher capital spending. Amazon also holds $122.3 billion of private equity stakes, mostly Anthropic and OpenAI preferred stock. These stakesThe Anthropic stake added large non-cash gains to profit. Anthropic can still ask Amazon to lend up to $15.0 billion under a financing facility. The debt is affordable. But while free cash flow stays negative, each new step of AI spending needs more borrowing until the new capacity earns revenue.
As of 2026-06-30.
- Checkpoints
- Oct 29, 2026 (estimate): Q3 2026 results: AWS growth, margin and backlog conversion. Pending. Watch: AWS operating margingrowth near or above the Q2 level of 37%, an operating margin near or above 39.43%, and a backlog that keeps turning into revenuegrowing pass; a margin drop or a stall in AWS growth fails.
Nov 2026 (estimate): EU decision on AWS as a Digital Markets Act gatekeeper. Pending. Watch: No designation, or a designation with rules that do not change AWS pricing, passes; rules that force large changes to AWS contracts or prices fail.
Dec 2026 (estimate): Amazon Leo starts initial internet service. Pending. Watch: Initial paid service for customers in 2026, as Amazon said in July, passes; a delay into 2027 fails.
Feb 2027 (estimate): Q4 2026 results and 2027 capital spending plan. Pending. Watch: Free cash flow that turns toward positive with steady AWS growth passes; a larger 2027 capex plan with still negative free cash flow fails.
Mar 29, 2027: FTC marketplace monopoly trial starts in Seattle. Pending. Watch: A settlement or trial progress with no forced change to the marketplace or fees passes; a ruling or settlement that forces large business changes fails.
- Recent events
- 2026-10-09: Judge 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.
2026-10-08: AWS 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.
2026-10-07: Amazon confirmed a small number of job cuts, mainly in its Stores business. Reuters reported, from an unnamed source, that the cuts were fewer than 1,000 jobs. In January 2026, Amazon cut about 16,000 corporate jobs.
2026-10-02: The Financial Times reported that Amazon is in talks to move about $8 billion of Nvidia chips into a separate company, paid for with debt, and lease them back. This is a press report only. Amazon did not comment, and no deal is agreed.
2026-09-30: Amazon and Synopsys signed a multi-year deal worth more than $1 billion. Synopsys will supplyagreement for chip design technology for Amazon's Trainium, Graviton and Nitroown chips. Amazon pays a license fee plus royalties that grow withSynopsys says the agreement is worth more than $1 billion. It also covers cloud and AI tools for chip volumeengineering.
2026-09-0114: Amazon continued cutting jobssold £4.25 billion of sterling notes in 2026four parts, including corporate technology and fulfillment roles in Washington statedue from 2029 to 2045, after eliminating about 16with interest rates from 5.200% to 6.650%. In July,000 corporate positions worldwide press reports said that Amazon planned no more bond sales in January 2026 as part.
2026-09-08: The board elected Kevin Mandia, the founder of its shift toward AIthe security company Mandiant, as a director. He joined the Audit Committee and the Security Committee.
2026-08-31: The FTC and 22 states sued Amazon in Seattle over its advertising auction practicessponsored ad auctions. The lawsuitcomplaint says Amazon hid surcharges that turned second-priceAmazon added a secret surcharge to the auctions into first-price auctionsfor more than seven years. The FTC says that Amazon likely took tens of billions of dollars from advertisers. Amazon denied wrongdoing.
2026-08-3118: The FTC and 22 states suedSEC registration for Amazon's purchase of Globalstar became effective. Amazon agreed in SeattleApril 2026 to buy Globalstar for $90 per share in cash or Amazon stock, saying it overcharged advertisers by more thanabout $2011.6 billion since 2019 by secretly overriding its second-price ad auctions with higherin total, undisclosed pricesfor Amazon Leo. Amazon denied wrongdoing and saidexpects to close the purchase in 2027.
2026-08-12: Zoox started to charge riders for its auctions lower advertiser costsrobotaxi service in Las Vegas, after a federal safety exemption on July 30, 2026.
2026-07-30: Amazon reported Q2 2026 results. Revenue was $200.6 billion, up 20% from lastmore than a year earlier. Operating income was $27.5 billion, up from $19.2 billion. Net income was $62.6 billion, or $5.75 per share, because it included $53.4 billion of non-operating income before tax, mostly from the Anthropic stake.
2026-07-30: In Q2 2026, AWS revenue grew 37%, to $42.2 billion, and AWS operating margin was 39.3%, up from 33.0% a year earlier. The AWS backlog was $496 billion, about $132 billion more than at the end of Q1. North America operating margin was 7.8%, and International operating margin was 4.0%.
2026-07-30: Amazon raised its 2026 plan for cash capital spending to about $220 billion, from about $200 billion. The CEO said that AWS will still not have enough capacity for all the demand in 2026, and that Amazon expects to double its 2025 power capacity by the end of 2027. For Q3 2026, Amazon guided revenue of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion.
2026-07-09: Amazon sold $25.0 billion of notes in eight parts, due from 2029 to 2066. In 2026 it also sold $37.0 billion of notes in March, €14.5 billion in March and C$14.0 billion in June, and it signed a $17.5 billion term loan in June.
2026-07-02: An Atlas V rocket launched 29 Amazon Leo satellites. Amazon said it has enough satellites in orbit to start initial internet service later in 2026.
2026-06-25: The European Commission said in a preliminary view that AWS should be a gatekeeper under the Digital Markets Act. A gatekeeper must follow extra rules on how it treats customers and rivals.
2026-04-20: Amazon invested $5 billion more in Anthropic and agreed to invest up to $20 billion more if Anthropic meets milestones. Anthropic agreed to spend more than $100 billion on AWS over 10 years.
2026-02-27: Amazon agreed to invest $50 billion in OpenAI, and OpenAI expanded its AWS contract by $100 billion over 8 years. Amazon paid the last $21.3 billion of the investment after June 30, 2026.