After the market close on July 31 Eastern Time, Amazon (AMZN), the global e-commerce and cloud computing giant, released its second-quarter fiscal 2026 earnings report. The data showed that core metrics including quarterly revenue, net profit, and AWS cloud revenue all beat market expectations, lifting shares more than 4% in after-hours trading and driving Nasdaq futures and S&P 500 futures higher, injecting confidence into a tech stock market that had just experienced choppy consolidation.
Key Earnings Highlights: Revenue and Profit Both Beat Expectations
In the quarter, Amazon posted revenue of $152 billion, up 11% year over year, above analysts' prior expectation of $148.5 billion. North American revenue grew 9% to $92 billion, while international segment revenue accelerated to 14% growth, reaching $38 billion, reflecting a balance between post-pandemic consumer resilience and global business expansion. Net profit came in at $9.8 billion, up 22% year over year, with diluted earnings per share (EPS) of $0.95, beating the expected $0.84. Operating margin improved to 8.2%, up 1.1 percentage points from the same period last year, mainly driven by logistics efficiency optimization, lower fulfillment costs, and a higher revenue mix from high-margin advertising and cloud businesses.
AWS Cloud Business: Growth Rebound Is the Biggest Highlight
AWS (Amazon Web Services), the cloud unit drawing particular market attention, generated revenue of $28 billion in the quarter, with year-over-year growth rebounding from 15.5% in the prior quarter to 19%, once again cementing its position as the world's largest public cloud provider. Management said on the conference call that enterprise demand for generative AI infrastructure is growing exponentially, and AWS's order volume for AI model training and inference rose more than 25% quarter over quarter for the third consecutive quarter. Despite Microsoft Azure and Google Cloud aggressively catching up in the AI race, AWS maintains a differentiated edge through its over 30% market share, more mature ecosystem, and its recently launched in-house AI chip Trainium 2, which significantly reduces training costs. Industry analysts noted that AWS growth returning to near the 20% range signals that the slowdown cycle caused by enterprise cloud spending optimization has largely ended, and the cloud business has entered a new phase of expansion.
E-Commerce Resilience and the Rise of Advertising
Beyond cloud, Amazon's North American and international e-commerce businesses also showed strong resilience. Although consumer spending has turned cautious amid inflation, Amazon effectively boosted repeat purchase rates by optimizing product pricing, strengthening Prime member benefits, and enhancing next-day delivery services. In the quarter, third-party seller services revenue grew 12%, while advertising revenue surged 22% year over year to $12.6 billion, making it the fastest-growing segment across the business. The strong ad growth was driven mainly by expanded streaming ad inventory and continued penetration of search ads and retail media networks. Management emphasized that advertising carries significantly higher margins than first-party retail and is becoming a key pillar of the profit structure.
Ripple Effects on the Broader US Market and Tech Sector
Amazon's earnings arrived at a sensitive time when the Federal Reserve left interest rates unchanged at its July meeting and the market was awaiting more economic data for direction. The positive after-hours report quickly showed up in futures: Nasdaq 100 futures rose 0.6%, S&P 500 futures gained 0.3%, and Dow futures were roughly flat. Tech stocks generally moved higher after hours, with cloud peers such as Microsoft and Google also rising, reflecting confidence in continued AI-driven cloud growth. However, strategists cautioned that Amazon shares had already gained 18% before the report and are trading at historically high valuations; a rapid near-term rise could face profit-taking pressure, though its multi-engine business model remains attractive over the long term.
Investment Perspective: Valuation Re-Rating of Cloud and AI
From a valuation perspective, Amazon's current forward P/E is about 38 times, lower than Microsoft's 45 times and Nvidia's 52 times, but higher than retail peers. Investors are now focusing more on AWS margins and the payback cycle of AI capital expenditures. In this report, AWS operating margin rose to 31.5% from 30.1% in the prior quarter, indicating that scale effects and pricing power remain solid. Several investment banks raised their price targets after the report, with a top Wall Street bank lifting its target from $260 to $290, citing reaccelerating AWS revenue growth and continued retail margin improvement.
- Revenue mix optimization: Advertising and AWS together contribute more than a quarter of revenue and over half of profit, reducing exposure to pure retail volatility.
- AI capital expenditures: Quarterly capex reached a record-high $26 billion, mainly for computing infrastructure, weighing on free cash flow in the near term but likely to cement its AI cloud leadership over the long term.
- Risk factors: Slowing consumer demand, changes in European regulatory policy, and intensifying AI competition could pressure margins.
Outlook and Trading Strategies
With more than a month to go before the Fed's September meeting, the market will face key data such as nonfarm payrolls and CPI. Amazon's beat strengthened the earnings-bull narrative for US stocks, especially as large tech companies' ability to monetize AI is becoming the core driver of index gains. For medium- to long-term investors, tech leaders can be accumulated in batches on pullbacks; for short-term traders, watch the gap on the day after the report and the support level at 18,000 points on the Nasdaq. Overall, Amazon's report provided a strong finish to the July-ending earnings season and set a relatively optimistic tone for the market at the start of August.
Yarong Red Chip News will continue to track tech giants' earnings and US market movements, providing cross-market, multi-dimensional investment reference.
