Amazon (AMZN) reported its fastest growth in Amazon Web Services (AWS) in 18 quarters, with Q2 2026 revenues increasing by 37% year-over-year, reaching $42.2 billion. Operating income surged by 64%, marking a margin expansion to 39.4% from 32.9%. However, the company’s free cash flow (FCF) turned negative, showing a $7.6 billion outflow compared to an inflow of $18.2 billion a year earlier, primarily due to a $66.1 billion year-over-year increase in capital expenditures associated with AI infrastructure investment.
AWS has surpassed a $25 billion annualized revenue run rate for AI services, experiencing triple-digit growth, while Amazon’s total operating cash flow rose to $161.4 billion from $121.1 billion in the previous year. Despite the healthy cash flow conversion rate of 119.3%, which is lower than its median of 126.9%, Amazon’s heavy investment in infrastructure has led to increased long-term debt, which hit $128.9 billion by the end of the second quarter.
Amazon’s significant capex for AI infrastructure was $54.2 billion in Q2 alone, part of an overall projected $220 billion spend for 2026. While the company is currently experiencing negative FCF, management is optimistic that as new data centers are activated, revenues will increase and ease cash flow pressures.
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