TL;DR — Amazon’s net income jumped 245% this quarter. Revenue only grew 43%. The gap comes almost entirely from a change in AWS server depreciation schedules, not from the underlying business accelerating.
Amazon’s headline this quarter was a 245% jump in net income. Read that twice and it still sounds absurd for a company this size. It’s also true, and it’s also almost entirely beside the point. Strip out one line item and the real story is a lot more ordinary: a good, not extraordinary, operating quarter from a company still spending faster than it earns.
Two Numbers, One Quarter
Net sales came in at $200.6 billion, up 19.6% year over year. Operating income, the number that reflects what the actual business of selling things and renting cloud servers produced, rose 43% to $27.5 billion. That’s a strong quarter by any normal measure.
Net income, the number that made the headlines, came in at $62.6 billion, up 245% from $18.2 billion a year earlier. The gap between those two growth rates, 43% and 245%, is $53.4 billion of non-operating income, and Amazon’s own filings say the bulk of it is a revaluation of its stake in Anthropic. Not a sale. Not cash in the door. A markup, driven by what Anthropic’s most recent funding rounds implied about its value.
That’s real accounting income under GAAP rules, and Amazon’s stake in Anthropic is a real asset with real economic value. But it is not retail margin, it is not AWS revenue, and it will not repeat itself every quarter on command. Treating $62.6 billion as the run rate for Amazon’s earnings power is a mistake, and it’s an easy one to make if you only read the top of the press release.
The Business Underneath the Markup
The operating business is worth looking at on its own, because it’s genuinely strong. AWS revenue hit $42.2 billion, up 37% year over year, the fifth straight quarter of accelerating growth. AWS operating margin expanded from 32.9% to 39.4%. Operating income in the segment grew 64%.
AWS is now 21% of Amazon’s revenue and better than 60% of its operating income. A year ago those numbers were 18% and 53%. Every point of mix shift toward cloud pulls the whole company’s earnings profile toward AWS’s economics, and AWS’s economics are a different business than shipping boxes.
The retail side isn’t just riding along either. North America grew sales 16% and operating income 21%, holding a 7.9% margin, up from 7.5%. Advertising, the highest-margin line Amazon runs, grew 26% to $19.8 billion. International turned in a 4.1% margin, modest, but a real improvement from the money-losing international operation of a few years back.
The Part That Should Worry You More Than It Excites You
Here’s the number that matters more than either the 245% or the 43%: trailing free cash flow went negative, a $7.6 billion outflow, down from an $18.2 billion inflow a year ago. Operating cash flow grew a healthy 33% to $161.4 billion trailing twelve months. Capital spending grew 64%, to $169 billion. The spending is winning that race right now.
Most of it is going to AWS. The segment took 76% of Amazon’s net property and equipment additions this quarter, and AWS’s property and equipment balance reached $263.8 billion, up from $190.1 billion just six months earlier. That’s the capacity behind the 37% growth number, landing in the same quarter the growth showed up. It’s the strongest argument for the buildout being real demand, not a hopeful bet.
It’s funded differently than it used to be, too. Long-term debt nearly doubled in six months, from $65.6 billion to $128.9 billion, on a wave of dollar, euro, and other currency bond issuance. Amazon can carry that debt; trailing operating cash flow is still larger than the total balance. But excess cash isn’t covering this buildout anymore. Borrowed money is doing real work on the balance sheet, and the bill comes due on a fixed schedule regardless of how AWS utilization plays out.
This Isn’t Just an Amazon Story
Amazon isn’t the only Big Tech balance sheet getting rewritten by a paper gain this earnings season. Alphabet posted a roughly $99 billion non-operating gain of its own this quarter on the value of its investment portfolio, the kind of number we’ve been tracking since we first wrote about Alphabet’s capital architecture and buyback discipline. When two of the largest companies on the market both report net income that’s inflated well past their operating reality in the same quarter, on the same mechanism, that’s not a coincidence worth ignoring. It’s a sign that AI-era equity stakes, held privately and marked to the last funding round, are becoming a recurring source of headline noise across the sector. We covered the mechanics of a similar mismatch in Microsoft’s backlog number that didn’t make the headline the other direction: sometimes the real story is buried below the topline, not inflating it.
The read-through for anyone modeling these businesses is the same either way. Skip the number the press release wants you to react to. Find the one that tells you what the operating business actually did, and build from there.
Sources: Amazon.com Q2 2026 earnings release and Form 10-Q for the quarter ended June 30, 2026, filed with the SEC. Third Pole Markets holds no position in Amazon as of publication. This is not investment advice, see our About page for our full disclosure policy.
The depreciation schedule change is disclosed in Amazon’s investor relations materials and its 10-K filings on SEC EDGAR.
