NEW YORK, July 28, 2026, 08:01 EDT — U.S. premarket
- Amazon NASDAQ:AMZN will announce its second-quarter earnings after markets close on Thursday.
- Analysts’ initial consensus estimates AWS revenue at $40.5 billion, with a margin of 33.8%.
- The figures indicate AWS operating income of $13.7 billion, which is roughly 3% lower than in the first quarter.
Amazon approaches earnings facing a tougher challenge than just headline cloud growth. While AWS revenue might increase, its operating profit may decrease on a sequential basis.
The gap is more significant than an ordinary earnings beat. AWS accounts for most of Amazon’s profit, even though its contribution to overall sales is much smaller.
According to initial Visible Alpha forecasts released by S&P Global NYSE:SPGI, AWS revenue is projected to be close to $40.5 billion. This suggests growth of 31.2% compared to the same quarter a year ago.
But the projected 33.8% margin would fall 390 basis points short of the figure reported in the first quarter. As a result, AWS operating income would decrease to approximately $13.7 billion, down from $14.2 billion.
Based on Amazon’s midpoint guidance, AWS is projected to account for 21% of overall group revenue, while potentially generating around 62% of the company’s total operating income.
| Investor test | Q1 2026 actual | Q2 2026 preliminary bar | Implied change |
|---|---|---|---|
| AWS revenue | $37.6 billion | $40.5 billion | Quarterly increase of 7.8% |
| AWS revenue growth | 28.0% | 31.2% | Up by 3.2 percentage points |
| AWS operating margin | 37.7% | 33.8% | Down by 390 basis points |
| AWS operating income | $14.2 billion | $13.7 billion | Quarterly decrease of 3.3% |
| Group revenue | $181.5 billion | $196.5 billion | Up 8.3% from previous quarter |
| Group operating income | $23.9 billion | $22.0 billion | Down 7.9% from previous quarter |
Based on initial AWS revenue and margin projections.
Central point of Amazon’s provided outlook.
The outlook is not wholly negative. Projected AWS operating income is set to stay roughly 35% higher compared with the same quarter a year ago.
Nevertheless, investors are valuing anticipated future cash flows. As a result, ongoing margin pressure could outweigh even another robust cloud growth result.
Amazon reported a $16.8 billion pre-tax gain from its investment in Anthropic in its first-quarter results. As a result, standard earnings-per-share comparisons are less informative than operating figures.
Shares ended Monday at $231.39, falling 0.3%. Morningstar NASDAQ:MORN assigns Amazon a valuation of $280, indicating potential upside of roughly 21% from that closing price.
Morningstar’s Dan Romanoff stated “AWS is the story, and AI is driving AWS.” He identified core factors as growth, backlog, capacity expansion, and depreciation. Morningstar
The 24/7 Wall St. column distributed by Yahoo presented a more assertive $400 projection. However, the article also referenced an average analyst target of $312.87.
| Valuation scenario | Stock price | Potential gain from $231.39 |
|---|---|---|
| Morningstar assessed value | $280.00 | 21% |
| Bullish analyst projection referenced by column | $312.87 | 35% |
| Column’s projected long-term bullish case | $400.00 | 73% |
The $400 estimate is presented by the author and does not represent official company guidance or consensus forecasts. This projection relies on expectations of substantially increased future earnings and persistently elevated valuation multiples.
Given Mahlangu, a contributor at Seeking Alpha, adopted a more cautious stance. He lowered his rating to Buy, pointing to increased cash burn, greater leverage, and investment in both AI and Amazon Leo as reasons for the change.
Cash-flow strain is becoming evident. Free cash flow over the trailing period declined 95% to $1.2 billion, compared to $25.9 billion in the previous year.
Operating cash flow increased by 30% to $148.5 billion. The drop was largely due to an extra $59.3 billion allocated to property and equipment.
Chief Executive Andy Jassy stated, “AWS is growing 28%—our fastest growth in 15 quarters.” The company’s custom-chip segment also surpassed a $20 billion annual revenue run rate. Amazon
The scope of the spending bill encompasses more than just data centres. On Monday, Amazon Leo submitted an application seeking permission to deploy as many as 5,105 direct-to-phone satellites starting in 2028.
The initiative introduces yet another project requiring substantial capital investment. Amazon currently has approximately 390 broadband satellites in orbit.
Amazon projects capital expenditures of roughly $200 billion for 2026. The company forecasts second-quarter revenue in the range of $194 billion to $199 billion, and operating income between $20 billion and $24 billion.
Risks: AWS may report margins below projections if expenses for depreciation, energy, and chips increase. An upward revision in capital expenditures could further heighten worries around cash flow. Additionally, a slowdown in third-quarter cloud revenue may offset any positive impact from an earnings beat.
A clear bullish scenario depends on accelerated AWS growth alongside stable margins. Robust sales combined with further spending may no longer suffice.
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