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July 31, 2026 • 3 min read
Analyzing a major technology enterprise's financial statements requires looking beyond top-line revenue to understand where operational profits are generated and how capital is deployed. By unpacking the income statement from Amazon's latest 10-Q filing for the second quarter of 2026, we can trace how cloud computing expansion, core retail services, and accounting markups on private equity holdings drove performance during the period.
Total net sales for Q2 2026 reached $200.6 billion, representing a 20% increase year-over-year. Operating income—the profit earned directly from core business activities before interest, non-operating items, and income taxes—rose 43% to $27.5 billion, yielding an operating margin of 13.7%.
The primary engine of operational growth was Amazon Web Services (AWS), the company's cloud computing reportable segment providing compute, storage, and database services. AWS revenue expanded 37% year-over-year to $42.2 billion, while its operating income jumped 64% to $16.6 billion—delivering a strong 39.4% segment operating margin. Amazon's regional retail segments also contributed to operational profits, with North America producing $9.1 billion in operating income on $116.2 billion in sales, and International generating $1.7 billion in operating income on $42.2 billion in sales.
Across disaggregated product and service categories, performance remained steady:
Quarterly net income grew significantly to $62.6 billion ($5.75 per diluted share), up from $18.2 billion ($1.68 per share) in Q2 2025. However, a major portion of this net income increase resulted from non-operating accounting gains rather than core operations.
Amazon recorded $53.4 billion in net non-operating income, driven by a $50.5 billion upward fair-value adjustment on equity investments in private companies. Under ASC 321's measurement alternative for non-marketable equity securities, companies adjust the carrying value of private equity investments when an observable price change occurs in an orderly transaction for identical or similar investments of the same issuer. As disclosed in the filing notes, this upward adjustment was primarily driven by observable price changes in Amazon's nonvoting preferred stock holdings in AI company Anthropic. While this markup substantially elevates GAAP net income, it reflects a non-cash valuation adjustment rather than operational cash flow.
To support expanding cloud workloads and artificial intelligence demand, Amazon continues to direct substantial capital toward physical infrastructure, including data centers and custom hardware. Over the trailing twelve months ended June 30, 2026, cash flow from operations reached $161.4 billion. However, capital expenditures—measured as purchases of property and equipment net of sales proceeds and incentives—totaled $169.0 billion over the same period, bringing trailing twelve-month free cash flow to negative $7.6 billion.
Looking ahead to the third quarter of 2026, Amazon anticipates operating income between $22.5 billion and $26.5 billion. Although heavy capital commitments temporarily compress free cash flow, Amazon's infrastructure buildout strengthens its capacity to capture long-term enterprise cloud and AI opportunities.
Last updated: July 31, 2026
