Haverhill Financial Research · Analysis · Big Tech · October 23, 2026
The short version
Amazon reports third-quarter results after the close on October 29. In the second quarter, sales rose 20% to $200.6 billion and operating income rose 43% to $27.5 billion. AWS grew 37%, its fastest pace in some time. Net income was $62.6 billion, but $53.4 billion of that came from gains on Amazon's investment in Anthropic. Trailing twelve-month free cash flow was negative $7.6 billion.
Operating income by segment, $ billions. Source: Amazon Q2 2026 earnings release.
AWS is doing the heavy lifting
AWS sales were $42.2 billion and its operating income rose to $16.6 billion from $10.2 billion. That is about 60% of Amazon's total operating income from roughly a fifth of its sales. The retail businesses improved too, but by smaller amounts. North America operating income rose to $9.1 billion from $7.5 billion, and International rose to $1.7 billion from $1.5 billion.
| Segment | Sales Q2 2026 | Op. income Q2 2026 | Op. income Q2 2025 |
|---|---|---|---|
| North America | $116.2B | $9.1B | $7.5B |
| International | $42.2B | $1.7B | $1.5B |
| AWSSales up 37% | $42.2B | $16.6B | $10.2B |
| Total | $200.6B | $27.5B | $19.2B |
Spending outruns cash
Amazon spent $54.2 billion on capital projects in the quarter, and that pushed trailing free cash flow below zero. Amazon can carry this for a while, but it means the company is now in the same position as Microsoft and Alphabet: the payoff from the spending has to arrive in AWS revenue and margin, because free cash flow no longer shows it.
A quieter third quarter, by design
Amazon guided third-quarter sales to $197 billion to $202 billion, growth of 9% to 12%. It said about 400 basis points of that slowdown comes from Prime Day falling in the second quarter this year rather than the third. Operating income guidance is $22.5 billion to $26.5 billion, compared with $17.4 billion a year earlier. Even the low end of that range would be a 29% increase.
What to watch on October 29
AWS growth. Whether it holds near 37% or slows as capacity catches up with demand.
Operating income against the range. Where results land in the $22.5 billion to $26.5 billion range.
Capital spending. The quarterly figure, last at $54.2 billion, and any outlook for 2027.
Anthropic gains. Investment gains can swing net income by tens of billions; operating income is the cleaner measure.
Our take
The operating results are better than the stock's usual debates give them credit for. AWS margins expanded while it grew faster, and retail profits are still rising. The weak spot is cash. With trailing free cash flow negative, Amazon's results now depend on AWS turning this year's spending into next year's revenue. Operating income guidance gives the company room to beat; the AWS growth rate is the number we would watch most closely.
Sources and disclosures
Figures come from Amazon's Q2 2026 earnings release, published July 30, 2026. Share of operating income and the growth implied by guidance are our calculations.
Disclosures. Haverhill Financial Research is a publisher of general financial commentary. This article is not personalized investment advice and does not consider any reader's financial situation; readers should do their own research. Nothing here is a recommendation to buy or sell any security. Company figures and guidance can change. The author of this post does not hold positions in Amazon or the other companies named. Data as of October 23, 2026.
