Amazon Q2 Earnings Surprise Market, Net Profit Up 45% YoY
E-commerce giant Amazon (AMZN) reported its Q2 2026 earnings after the US stock market closed on July 27, with revenue of $158.9 billion, up 12% year over year, beating analyst expectations of $156.5 billion; adjusted EPS of $1.86, up 45% YoY, significantly exceeding market consensus of $1.65. Following the news, the stock surged over 6% in after-hours trading, hitting an all-time high. This strong performance was primarily driven by the recovery of cloud services (AWS) and the explosive growth of AI-related businesses.
AWS Returns to Double-Digit Growth, AI Contribution Significant
AWS revenue this quarter was $26.3 billion, up 19% YoY, accelerating significantly from 13% in the previous quarter, ending a year-long streak of single-digit growth. Management noted in the conference call that enterprise customers' migration to the cloud and demand for AI inference workloads continue to rise, especially the deployment of generative AI service Amazon Bedrock and its proprietary chip Trainium doubled. AWS's operating margin also widened from 28.5% last quarter to 31.2%, indicating that economies of scale are starting to show. Analysts believe AWS's recovery is key to improving Amazon's profit structure.
E-commerce Core Profit Optimized, Advertising Becomes New Driver
In North America retail, revenue grew 9% YoY to $94.2 billion, but operating profit grew even higher at 22%, mainly driven by logistics cost optimization and a higher mix of high-margin product sales. Third-party seller services and subscription revenue (including Prime) continued to grow steadily. Notably, Amazon's advertising business hit $13.6 billion in revenue this quarter, up 26% YoY, becoming the second-largest profit contributor after AWS, benefiting from increased ad spending by platform sellers and expansion of streaming TV ads.
Capital Expenditure Surges, Focus on AI Infrastructure
Amazon's capital expenditure this quarter reached $31.2 billion, up 65% YoY, hitting a record high, with most spent on AI data centers, servers, and networking equipment. Management said the payback period for AI investments is long, but expects them to contribute hundreds of billions of dollars in additional revenue over the next three years. The market reacted positively, believing Amazon is actively positioning for the next wave of technology infrastructure, similar to its early AWS strategy.
Valuation and Investment Risk Assessment
Based on the closing price of $194.50 on July 27, Amazon's P/E ratio is about 38 times, slightly above its five-year average of 35 times, but considering accelerating profit growth and AI catalysts, its PEG (price/earnings to growth) ratio is only 1.5 times, still attractive. Key risks include regulatory pressures (EU Digital Markets Act), potential consumer spending slowdown affecting retail, and competition from AI rivals Microsoft and Google. Technically, the stock has broken through the previous resistance area of $188; if it holds above $195, the next target is $210.
Investment Strategy: Long-term Position Better than Short-term Trading
For conservative investors, Amazon's moat remains deep: AWS holds a 32% market share as the cloud leader, the retail ecosystem has high stickiness, and advertising margins continue to improve. It is recommended to accumulate on post-earnings pullbacks, especially if the stock drops to $180 or below, which can be considered a margin of safety. For active traders, watch whether the stock can hold the $190 level, with short-term support at $185. Overall, Amazon is at the beginning of a dual-cycle for AI and cloud, with clear long-term growth momentum, suitable for core holdings.
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