Capital

AWS Now Earns 60 Percent Of Amazon's Profit

Amazon reported 27.5 billion dollars of operating income for Q2 2026 and AWS supplied 16.6 billion of it. The guidance for next quarter is lower. Here is why that matters at renewal.

CapitalBy Servola Tech Desk2026-07-304 min read

AI-assisted, edited by humans. | Editor-in-Chief: Leon Soliman | Editorial standards

AWS Now Earns 60 Percent Of Amazon's Profit

Key takeaways

AWS produced 16.6 billion dollars of the 27.5 billion dollars Amazon earned in operating income in the second quarter, so 60 percent of your supplier's profit now comes from the unit that sells you compute.
Amazon guided third quarter operating income to 22.5 to 26.5 billion dollars, below the 27.5 billion it just reported, so assume margin pressure arrives at your next renewal rather than after it.
Purchases of property and equipment reached 173.0 billion dollars over twelve months, up 64 percent, and free cash flow was negative 7.6 billion dollars. That build is depreciated against the quarters in which your contract runs.
The 62.6 billion dollar net income includes 53.4 billion dollars of pre-tax gains primarily from the Anthropic stake, so read the operating line when you judge how much room a supplier has on price.

The 60 percent nobody put in a headline

Amazon reported 200.6 billion dollars of net sales for the second quarter on 30 July, up 20 percent year over year, and 27.5 billion dollars of operating income, up 43 percent. Inside that total, Amazon Web Services contributed 16.6 billion dollars of operating income on 42.2 billion dollars of sales. AWS is 21 percent of the revenue and 60 percent of the profit.

Why it matters. The retail machine is not what pays for Amazon any more. North America produced 9.1 billion dollars of operating income and International produced 1.7 billion. Every serious negotiation an operator has with this company, whether it is a cloud commitment, a marketplace fee or an advertising rate, is now a negotiation with a business whose earnings rest on one unit, and that unit is the one selling compute.

The 53.4 billion dollars that never touched a customer

Net income was 62.6 billion dollars, or 5.75 dollars per diluted share, against 18.2 billion dollars and 1.68 dollars a year earlier. That is the number the wires led with. It is not an operating result. Amazon states in the same release that the quarter includes 53.4 billion dollars of non-operating pre-tax other income, primarily from its investments in Anthropic.

The mark is legitimate accounting and it is not cash. It is a revaluation of a private stake, recorded because Anthropic's valuation moved, and it is nearly twice the 27.5 billion dollars the entire company earned from actually operating. When you are trying to work out how much pricing pressure a supplier is under, that revaluation tells you nothing at all. The operating line tells you everything.

A build large enough to turn cash flow negative

Over the trailing twelve months Amazon generated 161.4 billion dollars of operating cash flow, up 33 percent. In the same period it spent 173.0 billion dollars on property and equipment, up 64 percent. The company attributes the 66.1 billion dollar increase primarily to investments in artificial intelligence. Free cash flow across those twelve months was negative 7.6 billion dollars.

A company can run negative free cash flow deliberately, and Amazon has done exactly that before to buy a decade of position. The relevant fact for a customer is narrower than the debate about whether the strategy is wise. Capacity is being paid for ahead of the revenue it will carry, and depreciation on it begins whether or not the tenants arrive on schedule.

Amazon just guided profit down

For the third quarter Amazon guided net sales of 197.0 to 202.0 billion dollars and operating income of 22.5 to 26.5 billion dollars. The top of that operating range sits below the 27.5 billion dollars it had just reported. Amazon is telling the market to expect less operating profit next quarter than this one, in the same release in which Andy Jassy said AWS grew 36.7 percent year over year, its fastest in 18 quarters, and that the AI and chips businesses each passed a 25 billion dollar run rate.

The tension is the story. Revenue accelerating and guided operating profit falling at the same time is what a depreciation wave looks like when it reaches the income statement. The assets bought over the last year are now being expensed against the quarters ahead, and those are the quarters in which the contracts being signed this autumn will run.

What a European buyer should do before the next renewal

A supplier absorbing a depreciation step has two levers: raise prices, or hold the line and accept a thinner margin. Amazon's history points to a third path it prefers, which is to keep cutting list prices on commodity compute while charging for the layers above it. Data transfer, managed services and the newer AI services are where the money moves, and those AI services are precisely the lines Jassy singled out as passing a 25 billion dollar run rate. Expect the pressure to land there rather than on the headline instance price.

The practical move before your next enterprise agreement is to price the discount you are offered against the commitment term you are giving up. A multi-year commitment signed into a capacity glut is a bargain. The same commitment signed into a depreciation cycle is one of the ways a supplier funds its build. Ask what happens to your rate if you shorten the term by a year, and treat the size of that gap as the real information in the negotiation.

Frequently asked questions

How much of Amazon's operating income came from AWS in the second quarter of 2026?

AWS produced 16.6 billion dollars of the 27.5 billion dollars of group operating income, roughly 60 percent, on 42.2 billion dollars of AWS sales out of 200.6 billion dollars group-wide. AWS operating income rose 64 percent year over year.

Why was Amazon's net income so much larger than its operating income?

The quarter included 53.4 billion dollars of non-operating pre-tax other income, which Amazon attributes primarily to its investments in Anthropic. That is a revaluation of a private holding rather than cash received from customers, which is why net income reached 62.6 billion dollars against 27.5 billion dollars of operating income.

Is Amazon's free cash flow really negative?

Yes, on a trailing twelve month basis. Operating cash flow was 161.4 billion dollars and purchases of property and equipment were 173.0 billion dollars, leaving free cash flow at negative 7.6 billion dollars for the period.

Amazon had an extraordinary quarter by any measure, and the extraordinary part was not the 62.6 billion dollars. It was a cloud unit compounding at 37 percent while the parent told investors to expect less operating profit in the quarter ahead. Both facts came from the same page of the same release. The buyers who read the second one will negotiate better than the ones who stopped at the first.

AmazonAWSAnthropiccloud procurementcapital expenditureearnings

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