Amazon Q2 2026 earnings preview: AWS and AI spending take centre stage

When will Amazon report latest earnings?

Amazon reports second-quarter (Q2) after the United States (US) market closes on Friday, 31 July at 04.00am SGT.

The numbers arrive with the shares around $232, roughly 18% higher year-to-date (YTD), and with expectations tilted firmly towards the cloud division doing the heavy lifting once again.

Q2 2026 earnings expectations

The market is braced for a decent move. Options pricing points to a swing of around 6.3% on results day, above the average one-day move of 5.4% seen after recent reports. That gap suggests traders expect this set of numbers to matter more than usual.

Consensus looks for adjusted earnings per share (EPS) of about $2.26 and revenue near $197 billion. Total sales are forecast to climb roughly 17%, within Amazon's own 16% - 19% guidance range, so the top line is unlikely to spring a surprise on its own.

The interest lies beneath the headline. Amazon Web Services (AWS), advertising and the scale of artificial intelligence (AI) investment will do far more to shape the reaction than group revenue, which has become fairly predictable. Amazon has beaten earnings estimates in seven of the last eight quarters, setting a high bar. pricing points to a swing of around 6.3% on results day, above the average one-day move of 5.4% seen after recent reports. That gap suggests traders expect this set of numbers to matter more than usual.

Why AWS growth matters most

AWS remains the profit engine, and it is where the AI story is playing out most clearly. Constant-currency growth of around 32% is expected, slightly ahead of consensus, driven by demand for AI infrastructure that shows little sign of cooling.

The supporting evidence is stacking up. Cloud commitments jumped to $364 billion at the end of the first quarter (Q1) from $244 billion the quarter before, graphics processing unit (GPU) rental prices have stayed firm, and enterprise adoption of AI workloads continues to build. Supply, rather than demand, looks like the constraint.

Amazon's custom silicon is becoming a genuine growth driver in its own right. Management says the chip business grew nearly 40% quarter-on-quarter (QoQ) and now runs at more than $20 billion annually, a figure that could reach $50 billion on a standalone basis selling this year's output.

The strategic point is reduced reliance on NVIDIA. In-house chips lower the total cost of ownership for AWS and make it easier to convert a vast order backlog into revenue. That matters for a division defending a cloud market share above 45%.

The advertising business nobody talks about enough

Advertising is Amazon's fastest-growing and among its most profitable segments, yet it still gets less attention than retail or cloud. The run rate now sits near $70 billion, making Amazon the third-largest ad platform behind Google and Meta.

Growth here has been remarkable. Ad revenue reached $69 billion in 2025 from just $1.7 billion a decade earlier, a compound annual rate of around 45%. Even with gains slowing, high-teens growth could push the figure well beyond $115 billion by 2028.

Prime Video is the swing factor. Ads became the default on the service, offering advertisers reach across roughly 115 million US viewers, and a slate of live sport including NFL and NBA games gives Amazon a monetisation lever rivals cannot easily match.

The economics are hard to ignore. Advertising carries gross margins near 90% and operating margins around 50%, so every extra dollar of ad revenue does disproportionate work for group profitability. This quarter, ad growth in the low-20% range is expected.

The catch: margins and capital spending

The bull case comes with a bill attached. Capital expenditure (capex) is heading sharply higher, with AWS spending alone potentially reaching $165 billion in 2026, up more than 70% on the prior year. That money funds chips, data centres, power and cooling.

Margins are where the tension shows. Consensus sees full-year AWS operating margin slipping around 50 basis points (bp), but a steeper decline of 150 bp is plausible once higher memory prices, changing revenue mix and AI investment are accounted for.

Memory costs are a specific worry. Input costs could add at least $25 billion in 2026, comparable to the figure Microsoft has flagged, and that is difficult to offset without trimming spending elsewhere or slowing hiring. Retail also faces a tougher second-half comparison.

None of this undermines the longer-term case. Spending on this scale is a defensive as much as an offensive move, protecting AWS's lead while demand runs ahead of supply. The question for the market is how much near-term margin pressure it is willing to tolerate.

What the analysts and valuation say

Sentiment among analysts is strongly positive. Of those covering the stock, 79 have 'buy' recommendations against just four 'holds' and zero 'sells', with a mean price target of around $315, well above the current level near $232.

Valuation is not stretched by Amazon's own history. The shares trade on a forward price-to-earnings ratio (P/E) of about 27, below the two-year average, and at a discount to peers on both earnings and enterprise value-to-earnings before interest, taxes, depreciation and amortisation (EBITDA) measures.

That combination, punchy growth forecasts and an undemanding multiple, is what keeps the constructive case intact. Revenue could reach $1 trillion by 2028, growing faster than at most of its largest rivals, supported by strong cash generation.

The near-term risk is expectations rather than fundamentals. With so much good news priced into forecasts, the reaction on 31 July will hinge on whether AWS growth and margin guidance clear an already high hurdle.