#USEarningsSeason #ShareWeekly

I am firmly bullish on Amazon heading into this US Earnings Season and believe it currently stands as the strongest long-term compounder among the major tech giants under the spotlight. Tesla and Meta have already reported, and attention now turns to Microsoft, Alphabet, Amazon, Apple and NVIDIA, yet the combination of accelerating cloud growth, massive AI-related backlog and improving operating leverage makes Amazon the name I want to own through the next multi-year cycle. The stock closed recently near 248 dollars with a market capitalization around 2.68 to 2.70 trillion dollars after trading in a 52-week range of 196 dollars to 287.20 dollars. That valuation still sits at a trailing price-to-earnings multiple near 19.7 times and a forward multiple near 19.2 times, which looks reasonable given the growth trajectory.

In the second quarter of 2026 Amazon delivered net sales of 200.6 billion dollars, representing a 20 percent year-over-year increase and the strongest top-line growth rate in several years. Operating income rose 43 percent to 27.5 billion dollars, lifting the operating margin to 13.7 percent from 11.4 percent a year earlier. Amazon Web Services was the clear standout, generating 42.2 billion dollars in revenue, up 37 percent year-over-year and marking its fastest growth in 18 quarters. The AWS operating margin expanded to 39.4 percent.

On an annualized basis AWS now runs at approximately 169 billion dollars. Both the AI services business and the custom chips business each crossed the 25 billion dollar annual revenue run-rate threshold and continue to grow at triple-digit percentages. The remaining performance backlog for AWS stands at an impressive 496 billion dollars and has been expanding at triple-digit rates, giving high visibility into future demand through 2027 and even into 2028.

Advertising continued its high-margin contribution, rising roughly 26 percent to nearly 20 billion dollars in the quarter. North America sales grew 16 percent to 116.2 billion dollars while International sales increased 15 percent to 42.2 billion dollars. Trailing twelve-month operating cash flow reached 161.4 billion dollars, up 33 percent, although free cash flow turned temporarily negative at approximately negative 7.6 billion dollars because of elevated capital expenditure. Management raised the 2026 capital expenditure outlook to about 220 billion dollars from the previous 200 billion dollars, reflecting both higher memory costs and the need to add capacity as quickly as possible for AI workloads. Servers typically break even in under three years and have useful lives of five to six years, so the return profile remains attractive once the new capacity comes online.

Looking ahead to the third-quarter results scheduled for 29 October after the close, Amazon guided net sales between 197 billion dollars and 202 billion dollars, implying 9 percent to 12 percent growth and incorporating an approximately 80 basis-point foreign-exchange headwind. Operating income is expected between 22.5 billion dollars and 26.5 billion dollars compared with 17.4 billion dollars a year ago. Consensus sits near the top of the revenue range around 202 billion dollars and around 1.96 to 2.01 dollars in earnings per share. Excluding the shift of Prime Day into the second quarter, third-quarter growth would have been nearly 400 basis points higher. Analysts are watching whether AWS can sustain growth near 35 percent on the larger base; any print close to that level combined with solid margins would likely be received positively.

The larger question this week asks whether AI investments can drive lasting growth. In Amazon’s case the answer looks clearly affirmative. The company is not simply spending on capacity; it is monetizing AI through multiple layers. Customers are already committing multi-year contracts that lock in revenue for years. Custom silicon such as Trainium and Inferentia delivers 30 to 40 percent better price-performance than comparable alternatives, lowering the cost of inference and making large-scale deployment more economical.

Amazon’s own AI and chips businesses have each surpassed 25 billion dollars in annual run-rate and are growing triple digits. Capacity is largely reserved through 2027 with meaningful commitments extending into 2028. CEO Andy Jassy has stated that demand is so strong the company could productively deploy even more capital. This is not a speculative science project; it is contracted, high-visibility revenue that is already flowing through the income statement and is expected to keep accelerating.

Another important part of the weekly topic is whether earnings beats always translate into higher stock prices. History shows they do not. Amazon itself has delivered multiple strong beats in recent years only to see the shares trade sideways or even decline in the following sessions when guidance or free-cash-flow commentary disappointed the market’s elevated expectations. In the second quarter of 2026 the company reported a headline earnings-per-share figure of 5.75 dollars that included a large 53.4 billion dollar pre-tax gain related to its Anthropic investment; the adjusted picture was closer to 1.95 dollars or lower after stripping one-time items, yet the stock still rallied sharply in subsequent days because investors focused on the underlying AWS acceleration and backlog. Conversely, there have been quarters where Amazon beat on both revenue and earnings yet the stock sold off because capital-expenditure guidance rose more than expected or because free cash flow remained under pressure. The market is forward-looking and increasingly sensitive to the quality of the beat, the trajectory of capital intensity, and the sustainability of growth rather than simply whether the number cleared the consensus estimate by a few cents. A clean beat accompanied by confident commentary on AWS growth and a path toward free-cash-flow recovery would likely be rewarded; a beat that comes with higher-than-expected spending and softer near-term guidance could produce a muted or even negative reaction.

What sets Amazon apart from the other tech giants in this earnings season is the combination of scale, diversification and structural AI positioning. Retail and advertising continue to generate substantial cash and operating leverage, while AWS provides the high-growth, high-margin engine. The 496 billion dollar backlog is more than double the level at the start of 2026 and gives a multi-year runway that few peers can match. The custom-chip franchise is turning into a genuine competitive advantage that both lowers costs for customers and creates an additional high-growth revenue stream. Management has repeatedly raised its long-term ambition for AWS, now speaking of the possibility that the business could eventually reach a trillion-dollar annual revenue scale with attractive free-cash-flow characteristics. Against that backdrop the current valuation near 248 dollars per share and roughly 2.7 trillion dollars of market capitalization continues to look attractive relative to the growth algorithm.

Of course risks remain. Capital intensity is elevated and free cash flow is under near-term pressure. Power availability and supply-chain constraints for critical components can slow the pace at which new capacity comes online. Competition in both cloud and generative AI remains intense. Yet the visibility provided by the backlog, the rapid monetization of AI services and chips, and the improving operating margins across the broader business give Amazon a clearer path to durable growth than most large-cap technology names currently offer. Earnings beats are useful confirmation, but the real driver of lasting shareholder value will be the company’s ability to convert today’s heavy investment cycle into tomorrow’s high-return cash flows. On that measure Amazon is executing well and remains my preferred holding among the group reporting this season.

I will be watching the 29 October print closely for any update on AWS growth rate, the size of the remaining backlog, capital-expenditure trajectory and qualitative comments around AI demand. In the meantime the fundamental setup continues to support a constructive long-term stance. The combination of 20 percent overall revenue growth, 37 percent AWS growth, 39.4 percent AWS operating margin, a 496 billion dollar backlog, dual 25-billion-dollar AI and chips franchises growing triple digits, and a still-reasonable valuation near 248 dollars makes Amazon the standout in this US Earnings Season for investors
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