AMAZON COM INC Q2 2026 earnings call

Hello, and welcome to our Q2 2026 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025. Our comments and responses to your questions reflect management's views as of today, July 30th, 2026, only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions.

Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including for memory chips, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. Now I'll turn the call over to Andy.

Thanks, Dave. We're reporting $200.6 billion in revenue, up 20% year-over-year. Operating income was $27.5 billion, up 43% year-over-year. Q2 was another very strong quarter for Amazon. I'll start with AWS, which is booming right now, and I'll share the numbers, what we think is going on, and why we're enthusiastic about the ROIC equation, even with heavy CapEx the next few years. First, the numbers. Revenue growth of 36.7% year-over-year, accelerating for the fifth straight quarter, our fastest growth in 18 quarters back when AWS was less than half its current revenue size. We added over $4.6 billion in revenue quarter-over-quarter, about 80% more than our largest increase ever. Our backlog stands at $496 billion, growing triple digits year-over-year.

AWS is now a $169 billion annualized revenue run rate business, which, for perspective, would place it 24th on the Fortune 500 list if it was a standalone company. Our chips business now has an annual revenue run rate of over $25 billion, growing triple-digit percentages year-over-year. Our AI revenue run rate climbed significantly quarter-over-quarter, and is now also over $25 billion, growing triple-digit percentages year-over-year. Customers choose AWS because we offer the broadest capabilities. They want their AI inference to reside near their other applications and data, and more of it resides in AWS than anywhere else. Because AWS has the strongest security and operational performance. We're seeing strong growth across both AI and non-AI, what we call core, and growth in one is driving growth in the other.

Growth in AI drives core because post-training reinforcement learning and agent tool use is mostly done on CPUs versus AI accelerators. This is an advantage for AWS, as our Graviton chip is the strongest CPU chip, offering up to 30%-40% better price performance than other options. You need a place to store this AI data and to run vector databases, which are also emblematic of a meaningful edge for AWS because we have the broadest and most capable functionality by a fair bit in these core infrastructure areas. We feel similarly about the AI stack, top to bottom. We have a unique offering that customers are excited about. As we've been saying for 18 months now, technically competent companies are going to build their own foundation models. Not the really big frontier models, but smaller models that leverage their proprietary data.

There is no easier service for this than our SageMaker AI service. Customers also need a high-performance, cost-effective inference service, and that's what Amazon Bedrock provides. Bedrock not only provides the best selection of leading models at superior performance and with the governance and security controls that companies need, it's also continuing to grow incredibly quickly. In addition to leading model building and inference services, customers need easier ways to build, run, and leverage agents. For example, even after you've built an agent, you have a lot of muck to worry about. A production agent needs somewhere secure to run, memory so it holds context, an identity so it can act on a user's behalf, tools and data to connect to, and a way to watch what it's doing once real traffic hits. Stitching all that together reliably is hard, and it's stalled many production deployments.

It's why we've built Amazon Bedrock Agents. It provides building blocks as managed infrastructure, and our teams keep iterating, recently adding features like policies which give companies deterministic controls over what agents can do, payments so agents can execute transactions autonomously, web search to ground agents' knowledge without having to leave AWS, and a new harness that further speeds up how fast customers can put this all together, including creating the agent with Strands. While companies will construct their own purpose-built agents from the ground up, most will also use turnkey agentic services. Coding agents are a good example, and there are several successful ones, including Claude Code, Codex, and our own spec-driven Kiro, which is up to 50% more cost-effective than others and tripled in usage quarter-over-quarter.

Another of these agentic services is Amazon Q, an intelligent AI work companion that helps you manage, search, and automate your digital workload across email, calendar, local or cloud files, and custom workflows. Unlike other offerings in this space, Q also lets you manage across leading SaaS tools like Slack, Salesforce, Jira, Teams, and ServiceNow. Q enforces a company's existing access controls so each person sees only what they're cleared to see. Then it takes action: scheduling meetings, drafting and sending email, updating a CRM record, building a dashboard, and more. In Q2, we made Q even more capable, adding autonomous agents that customers set up in plain language to run continuously in the background and carry out multi-step tasks, a personalized activity feed that pulls email, messages, calendars, and tasks into one prioritized view, and 16 new integrations, including Adobe, Moody's, and Snowflake.

Q has momentum, with 3M, Allianz, AstraZeneca, Autodesk, BMW, Exxon, FINRA, Hyundai, Intuit, Mondelēz International, Moody's, the NBA, the NFL, Sun Life, and Southwest Airlines all using it. We also have services like Amazon Connect, our call center service, and AWS Transform, which automates software migration growing quickly. I will mention one more that I am excited about. As frontier models get increasingly powerful, they're making it easier to find security vulnerabilities in technical applications, many of which humans haven't found.

This is obviously concerning for companies that protect important data. We recently released AWS Continuum, which discovers, prioritizes, validates, and remediates code vulnerabilities. It starts by ingesting the backlog of vulnerabilities a team already has and then leverages the new frontier models to run comprehensive scans. Continuum uses agents in each company's own business context to prioritize what matters, reasoning through questions like, "Is the affected component deployed? Is it reachable?

Is it in a production path? What's the impact if it's exploited?" Then it validates vulnerabilities in a sandbox so teams aren't chasing false positives. Finally, it recommends the fix. It is hard to talk with enterprises about AI right now without their mentioning security. We expect Continuum to grow quickly. I mentioned earlier that our chips revenue run rate is now over $25 billion. We are unusually well-positioned for this AI inflection, given our leading price-performance chips in both AI with Trainium and CPU with Graviton. In addition to the two leading AI labs in the world, Anthropic and OpenAI, making multi-year, multi-gigawatt commitments to Trainium, an increasing number of AI startups are also adopting Trainium, including unicorns like Neurorobotics and Odyssey, joining startups like Twelve Labs, Descartes Labs, Poolside AI, Karakuri, Metagenomi, NetoAI, and Splash Music, and larger companies like Uber and Pinterest all adopting Trainium.

Graviton is used by 98% of our top 1,000 EC2 customers. The revenue commitments have increased nearly 3x quarter-over-quarter, and Graviton5 is growing nearly 2x faster as Graviton4 did. We also continue to have a deep partnership with Nvidia, and we'll continue making AWS the best place to run Nvidia chips, as we have customers who will run on Nvidia for as long as we can foresee, and we believe strongly that customers want choice. Choice is good for customers, competition, and driving the cost of inference down, which customers care deeply about. Let me talk for a second about how we see this investment playing out. Earlier this year, we said we plan to invest approximately $200 billion in cash CapEx in 2026, the majority of which to support AI and AWS.

At this level of spend and higher, we have clear line of sight to strong financial returns. I'll explain why. There are two major parts of the investment, the data centers and the servers and networking equipment that go into them. These have different capital cycles. Data center capital is spent starting two years before we can put servers into them to start monetizing. Once a data center opens with servers plugged in, we start generating significant revenue right away and then get to monetize these data centers for 30+ years without having to spend that startup capital again. Servers and networking equipment operate on a shorter cycle. We typically purchase these a few months before putting them into service, so we have strong visibility into customer demand before we trigger the spend. If the demand isn't there, we won't spend the capital.

For servers and networking equipment, on average, it takes a little less than three years to break even on that investment. The servers currently have a useful life of at least five to six years, and most of our AI capacity these days is being contracted for at least five-year terms. That means that we're driving significant free cash flow on the servers and networking equipment in the two to three years after we break even. It's also worth noting that AWS has a strong track record of pulling forward break evens on server equipment where we've already made meaningful progress and finding ways to extend the useful life of this equipment without sacrificing customer experience.

Thanks, Andy. Starting with our top-line financial results, worldwide revenue was $200.6 billion, a 20% increase year-over-year, excluding the impact of foreign exchange. These results include the timing shift of Prime Day into Q2 for most of our largest countries, including the U.S. In Q2, we reported worldwide operating income of $27.5 billion. This includes the benefit from two items that reduced expenses by approximately $1.2 billion during the quarter. First, we received tariff-related refunds of approximately $600 million. This is included in our North America segment and represents the significant majority of refunds we expect to receive. Second, we recorded a separate benefit of approximately $600 million related to the change in fair value measurement of energy contracts subject to derivative accounting. This primarily impacts the AWS segment. These energy contracts are to secure electricity supply for existing and future operations.

Certain terms in these contracts cause them to be subject to derivative accounting. Derivatives are measured at fair value each reporting period, and changes in fair value measurements will create unrealized gains and losses recorded within operating expenses on our statements of operations. While the impact of these fair value measurements can vary, these adjustments have not been significant in prior quarters. Moving on to our segment results. In the North America segment, second quarter revenue was $116.2 billion, an increase of 16% year-over-year. International segment revenue was $42.2 billion, an increase of 15% year-over-year, excluding the impact of foreign exchange. Worldwide paid units grew 17% year-over-year. Prime remains a key pillar of our business, and our double-digit year-over-year membership growth reflects the value our offerings deliver at scale.

We saw broad-based momentum across the inputs that drive our customer experience, including new selection, sharp prices, and fast delivery. Shifting to profitability, North America segment operating income was $9.1 billion with an operating margin of 7.9%. International segment operating income was $1.7 billion with an operating margin of 4.1%. In our fulfillment network, we made progress optimizing inventory placement, shortening shipping distances, reducing touches per package, and improving consolidation rates. We're expanding our deployment of robotics and automation, which have been integral to our operations for decades. We're retrofitting our facilities with our latest generation technology, and we expect to more than double our fleet of robotic arms, like Cardinal and Sparrow, in 2026.

We continue to lower our overall cost to serve, even as we face heightened transportation costs driven by fuel inflation from the conflict in the Middle East and higher line haul rates from driver capacity limitations. Excluding the impact of higher fuel and line haul rates, shipping costs grew more slowly than worldwide unit growth at a pace that is relatively consistent with last quarter. On the operating income side, the impact of these higher costs is partially offset by our FBA fuel and logistics surcharge that was implemented in April. Looking ahead, we see meaningful opportunities to further enhance productivity across our global fulfillment network, all while continuing to raise the bar in delivery speed. While operating margin may fluctuate and progress may not always be linear, we take a deliberate approach to achieving sustained long-term improvement in our cost to serve.

Moving to the AWS segment, revenue was $42.2 billion, up 36.7% year-over-year, driven by both core and AI services. AWS now has an annualized revenue run rate of $169 billion. Customers continue to increase cloud migrations and scale up their use of AWS core services. Increasingly, customers seeking the full benefits of AI are accelerating their transition to the cloud. We see a strong linkage between AI spend and core growth. As customers invest in AI, we see a corresponding increase in core consumption. We expect this relationship to strengthen over time as more AI workloads move into full-scale production and drive additional demand for our core services. AWS operating income was $16.6 billion, which reflects our strong growth, coupled with our focus on driving efficiencies across the business.

Our investments in software and process improvements optimize server capacity and help to develop a more efficient network using our lower cost custom silicon and custom network gear. Now turning to our cash CapEx, which is $53.1 billion in Q2. This primarily relates to AWS and generative AI as we invest to support strong customer demand. We'll continue to make significant investments, especially in generative AI, as we believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow. Before moving on to guidance, I'll briefly touch on the impact from the tariff-related refunds on our results. We are participating in the tariff refund process, as I mentioned earlier, we received approximately $600 million in Q2. The amount is limited for a couple of reasons. First, our teams did a lot of work forward buying and pre-positioning inventory to avoid tariff costs.

Second, we are not the importer of record for the large majority of items sold in our store, given suppliers typically handle imports and pay relevant tariffs. In cases where we did see an increase in cost due to tariffs, we largely absorbed these costs rather than pass them on to customers. You can see that in how we stayed very sharp in our price throughout the last year. With our product prices on average 14% less than other retailers, according to third-party research firm, Profitero. We've identified a limited set of circumstances where we can trace that we passed specific import charges on to customers. When we receive those refunds, we will proactively contact affected customers and automatically issue refunds to them. Otherwise, like other large retailers, we'll utilize refunds to continue to invest in low prices for customers. I'll finish with our financial guidance.

Q3 net sales are expected to be between $197 billion and $202 billion. I'll call out two areas that are driving the sequential deceleration in net sales growth from Q2 to Q3. First, Prime Day timing shifted this year with the sales event occurring in Q2 for most of our large countries, including the U.S. In 2025, Prime Day was entirely in Q3. Excluding the impact of Prime Day in both 2025 and 2026, third quarter 2026 year-over-year growth would have been nearly 400 basis points higher. We recognize the timing shift of Prime Day creates some noise in the modeling of our financial results. However, after adjusting for Prime Day, as we look across our stores business heading into Q3, we see strong customer engagement, growth, and a continuation of the trends that we have seen in the first half of the year.

Second, the Q3 guidance anticipates an unfavorable impact of approximately 80 basis points from the year-over-year changes in foreign exchange rates based on current rates. Q3 operating income is expected to be between $22.5 billion and $26.5 billion. I want to thank our teams across the company for their hard work and focus on customers. We'll continue to work to deliver more value to the broad range of customers we serve across each of our businesses, which is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.