Amazon Faces 2.2% Decline in July Online Sales as AWS Remains a Buffer

SEATTLE, August 16, 2026, 13:05 PDT —

US nonstore sales dropped by 2.2% in July following Amazon’s decision to move Prime Day to June.
AWS generated 60% of Amazon’s operating income in the second quarter, despite accounting for just 21% of total revenue.
The midpoint of Amazon’s third-quarter sales growth stands at 10.5%, compared to 20% seen in the second quarter.

Amazon.com Inc. NASDAQ:AMZN starts the week as US nonstore retail sales dropped 2.2% in July, a decrease attributed in part to Prime Day’s shift into June. Amazon’s stock finished Friday at $262.65, down 0.94%.

The timing change is significant, as Amazon’s third-quarter revenue midpoint stands at $199.5 billion, marking a 0.5% decrease compared to its second-quarter figure. The projected growth midpoint is 10.5%, which is nearly half the 20% growth rate recorded in the previous quarter.

Friday market snapshot	Close	Daily move
Amazon NASDAQ:AMZN	$262.65	-0.94%
S&P 500	7,785.76	-0.17%
Nasdaq Composite	26,729.16	-0.3%

August 14 closes. Sources: MarketWatch and Associated Press.

The decrease in July was widespread and signals the need for caution. Overall retail sales slipped 0.6%, missing expectations of a 0.1% rise. Core sales, which feed into gross domestic product figures, dropped 0.4%, compared to estimates for a 0.3% gain.

July US retail data	Reported	Forecast
Overall retail sales, m/m	-0.6%	+0.1%
E-commerce and mail-order retailers	-2.2%	Not stated
Core retail sales	-0.4%	+0.3%
Overall retail sales, y/y	+5.0%	Not stated

Source: Reuters, citing the US Census Bureau.

The online drop does not clearly reflect Amazon demand. Prime Day shifted buying into June, while rival retailers also moved promotions earlier. Nonetheless, softer consumer sentiment and reduced core spending set a higher hurdle for the holiday season.

AWS delivers a buffer to profits. Amazon’s cloud business posted $16.6 billion in operating income for the second quarter, accounting for 60.4% of overall profit while representing only 21.0% of total revenue. The figures are based on segment data released by Amazon.

Q2 segment	Revenue	Revenue growth	Operating income	Operating margin
North America	$116.2B	16%	$9.1B	7.8%
International	$42.2B	15%	$1.7B	4.0%
AWS	$42.2B	37%	$16.6B	39.3%
Amazon total	$200.6B	20%	$27.5B	13.7%

Margins calculated from Amazon’s reported figures. Source: Amazon Q2 results.

Chief Executive Andy Jassy said, “AWS is booming, growing 36.7% year-over-year in Q2—our fastest growth in 18 quarters.” Both AWS’s AI and chip operations passed $25 billion each in annual revenue run rates. Amazon

The outlook for the next quarter appears more challenging. Amazon forecast revenue in the range of $197 billion to $202 billion, with operating income expected between $22.5 billion and $26.5 billion. The midpoint suggests a modest drop in sales from the prior quarter and an 11% decrease in operating income.

Amazon measure	Q2 actual	Q3 midpoint	Sequential change
Revenue	$200.6B	$199.5B	-0.5%
Year-over-year revenue growth	20.0%	10.5%	-9.5 percentage points
Operating income	$27.5B	$24.5B	-10.9%

Midpoints and changes calculated from Amazon’s guidance.

Analysts are upbeat following AWS’s faster growth. FactSet reports an average price target of $320.01 after the earnings, representing a 21.8% gain from Friday’s close. Some upper-end targets of $365 suggest potential upside of 39.0%.

Analyst recommendation	Rating	Target	Upside from $262.65
Piper Sandler Companies NYSE:PIPR	Overweight	$320	21.8%
Cantor Fitzgerald	Overweight	$320	21.8%
Barclays PLC LON:BARC	Overweight	$365	39.0%
JPMorgan Chase & Co. NYSE:JPM	Overweight	$365	39.0%

Targets issued July 31. Sources: Piper Sandler, Cantor Fitzgerald, and Barclays and JPMorgan. FactSet mean from MT Newswires.

Risks are centered on consumer activity and expenditure. Trailing free cash flow shifted to a $7.6 billion outflow, reversing from an $18.2 billion inflow. The $25.8 billion decline came after increased AI infrastructure acquisitions. A persistent slowdown in retail could mean AWS becomes more crucial to the company’s valuation.

Monday’s initial challenge is seeing if investors view July’s decline in online sales as a timing fluctuation. The real test arrives with third-quarter results, as AWS expansion needs to balance the absence of the Prime Day boost and Amazon works to restore cash flow.

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Further analysis

Editorial insight

What caused US online retail sales to drop in July?

Nonstore sales dropped by 2.2% compared to June, influenced in part by Amazon shifting Prime Day to June. Other retailers brought forward their promotions as well. As a result, the decrease reflects some timing effects; however, softer consumer sentiment means the entire decrease cannot be purely attributed to timing.

Is AWS capable of balancing slower growth in Amazon's retail business?

AWS generated 60.4% of Amazon's operating income in the second quarter, while contributing 21.0% of revenue. Its operating margin, at 39.3%, was significantly higher than the retail unit's. This profit composition offers considerable support to Amazon, though it also increases the stock’s reliance on ongoing expansion in cloud services.

What factors contribute to Amazon projecting slower growth in its third-quarter outlook?

The midpoint for sales guidance is $199.5 billion, representing a 0.5% drop compared with the second quarter. Year-over-year growth at the midpoint stands at 10.5%, down from 20% in the previous quarter. While the timing of Prime Day accounts for some of the slower pace, the extent of the consumer slowdown is unclear.

What is the primary financial risk faced by Amazon shareholders?

Trailing free cash flow decreased by $25.8 billion, resulting in a $7.6 billion outflow as spending on AI infrastructure rose. The expenditure has the potential to boost future AWS capacity, but shareholders continue to require revenue expansion and operating profit for that investment to translate into cash flow.