Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 30, 2026 · Beat 6 of last 7 quarters
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Amazon's massive CapEx increase and capacity constraints underscore the AI infrastructure buildout's intensity. The company's custom silicon strategy (Trainium, Graviton) and multi-gigawatt commitments from AI labs signal a shift toward specialized, cost-efficient compute. AWS's accelerating growth and backlog suggest sustained demand for data centers, power, and networking equipment.
Amazon reported Q2 revenue of $200.6 billion, up 20% year-over-year, and operating income of $27.5 billion, up 43%. AWS revenue grew 36.7% to $42.2 billion, with operating income of $16.6 billion. The company received $600 million in tariff refunds and a $600 million benefit from energy contract derivative accounting. Prime Day shifted into Q2, boosting results. AWS backlog reached $496 billion, and chips and AI revenue run rates both exceeded $25 billion.
Management raised 2026 cash CapEx guidance to approximately $220 billion, up from $200 billion, citing higher memory costs. They stated that even at this level, they will not have enough capacity to meet all demand in 2026 and expect the same in 2027, with demand for 2028 already striking. AWS is projected to become at least a few hundred billion-dollar revenue business, possibly reaching $1 trillion annually. AWS margins are expected to fluctuate but are tracking ahead of the core business's trajectory at the same stage. Q3 revenue guidance is $197-202 billion, with operating income of $22.5-26.5 billion, reflecting Prime Day timing shift and FX headwinds.
“We now believe we will spend approximately $220 billion in cash CapEx in 2026. The higher cost of memory pushing this number up from our prior estimate of about $200 billion. Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too.”
on Capacity and CapEx
“We long believed AWS could become a few hundred billion-dollar revenue business and now believe it'll be at least double that, and very possibly be a trillion-dollar annual revenue business for us in time, with very appealing accompanying free cash flow and return on invested capital.”
on AWS Long-Term Potential
“We see the margins and returns in AI tracking what we saw with Core at the same point of evolution, actually a little ahead.”
on AI Margins
Many have assumed AI workloads would be lower margin. Can you talk about the drivers of the 39% AWS operating margin and sustainability? Also, does Amazon need its own leading frontier model?
Brian Olsavsky cited disciplined efficiency gains, capacity optimization, and fixed cost management. Andy Jassy added that AI margins are tracking ahead of core at the same stage. On frontier models, he said AWS can be successful without one, but they are pursuing one for cost control and prioritization, expecting at least six comparable models in a few years.
Was AWS acceleration driven by capacity coming online? How much capacity might you add in the second half and into 2027?
Andy Jassy attributed growth to broad functionality, operational performance, and AI pulling core demand. He confirmed they are on track to double power capacity by end of 2027 versus 2025.
Will you be able to slow long-lived data center spend in 2027? And how do you think about selling Trainium to third-party data centers?
Andy Jassy said demand is so high that most 2027 capacity is already reserved, with significant reservations for 2028. On Trainium, he said they are actively exploring selling chips separately from the cloud, with a real chance of doing so in the future.