Amazon.com, Inc. (אמזון)
Analytical review · Quarter ended June 30, 2026 (Q2 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. Amazon's Form 10-Q for the quarter ended June 30, 2026, filed July 31, 2026; the Q1 2026 10-Q; the Form 10-K for 2025; the quarterly earnings releases from October 2025 to July 2026; and Form 8-K filings on the OpenAI agreement, the Globalstar acquisition, a term loan and note issuances. Market data: closing price on Oct 5, 2026; Bank of Israel representative USD rate for the same day. This review replaces the previous version, which was based on the 2025 annual report.
Company Profile
Amazon.com, Inc. operates an online store and a third-party marketplace, a logistics and delivery network, the Prime membership, an advertising business, and cloud services under the AWS brand. It designs its own chips for servers and AI, and is building a satellite network called Amazon Leo. The company is headquartered in Seattle and employs about 1.6 million people.
Revenue for the 12 months ended June 2026 was $775.7 billion. The company reports three segments: North America (58% of revenue in the quarter), International (21%) and AWS (21%). AWS is the main source of operating income: $16.6 billion of $27.5 billion in the quarter.
Since 2023 Amazon has invested in two private AI companies, Anthropic and OpenAI. Both are also large AWS customers. This dual relationship — investor and supplier — is one of the central topics of this review.
Financial Performance
The quarter: operating acceleration, and net income that is mostly revaluation
In the April–June 2026 quarter revenue rose 20% to $200.6 billion. Operating income rose 43% to $27.5 billion, and operating margin reached 13.7%. AWS grew 37%, advertising 26%, third-party seller services 16% and online stores 15%.
Prime Day: in 2026 the annual sales event took place in June, inside Q2. In 2025 it was in July, in Q3. According to management, Q3 growth excluding the event would be nearly 4 percentage points higher. The company did not quantify the contribution to Q2. If it was similar, Q2 growth excluding the event was about 15% (our estimate).
What needs to be excluded from earnings: net income for the quarter was $62.6 billion, $5.75 per share. Of $80.9 billion of pre-tax income, $53.4 billion was "other income", of which $50.5 billion was an upward revaluation of Amazon's preferred stock in Anthropic. The revaluation is based on prices in Anthropic's funding rounds and is a Level 3 measurement — there is no traded market price. Operating income also included about $640 million of tariff refunds and a $551 million unrealized gain on long-term electricity contracts. Excluding all of these before tax, at a tax rate of about 19%, EPS for the quarter was about $1.94, versus about $1.47 in the prior-year quarter on the same method (our calculation).
| $ millions | Q1-25 | Q2-25 | Q3-25 | Q4-25 | Q1-26 | Q2-26 |
|---|---|---|---|---|---|---|
| Revenue | 155,667 | 167,702 | 180,169 | 213,386 | 181,519 | 200,606 |
| of which AWS | 29,267 | 30,873 | 33,006 | 35,579 | 37,587 | 42,232 |
| of which advertising | 13,921 | 15,694 | 17,703 | 21,317 | 17,243 | 19,809 |
| Operating income | 18,405 | 19,171 | 17,422* | 24,977* | 23,852 | 27,461 |
| Other income, net | 2,749 | 1,117 | 10,186 | 1,177 | 15,647 | 53,415 |
| Net income | 17,127 | 18,164 | 21,187 | 21,192 | 30,255 | 62,647 |
| Diluted EPS ($) | 1.59 | 1.68 | 1.95 | 1.95 | 2.78 | 5.75 |
* Q3 2025 includes $4.3 billion of special charges (FTC settlement and severance); Q4 2025 includes $2.4 billion (Italian tax disputes, a lawsuit settlement, severance and impairments).
The multi-year context
In 2023–2025 revenue grew 11.7% a year on average, and operating margin rose from 6.4% to 11.2%. Growth in the first half of 2026 was 18%. Over the last 12 months, after adding back the 2025 special charges and removing the tariff refunds and electricity-contract gains, operating income was about $99 billion, 12.8% of revenue (our calculation). Reported trailing EPS is $12.44; excluding the revaluations it is about $7.4–7.5.
| $ billions | 2021 | 2022 | 2023 | 2024 | 2025 | 12 months to 6.2026 |
|---|---|---|---|---|---|---|
| Revenue | 469.8 | 514.0 | 574.8 | 638.0 | 716.9 | 775.7 |
| Operating income | 24.9 | 12.2 | 36.9 | 68.6 | 80.0 | 93.7 |
| Operating margin | 5.3% | 2.4% | 6.4% | 10.8% | 11.2% | 12.1% |
| Operating cash flow | 46.3 | 46.8 | 84.9 | 115.9 | 139.5 | 161.4 |
| Net property & equipment purchases | — | — | 48.1 | 77.7 | 128.3 | 169.0 |
| Free cash flow (company definition) | — | — | 36.8 | 38.2 | 11.2 | −7.6 |
Balance Sheet & Capital
In six months total assets grew from $818 billion to $1,096 billion. Three changes explain most of the increase:
- Debt: senior notes rose from $68.8 billion (face value) to $132.1 billion, through issuances in U.S. dollars, euros, Swiss francs and Canadian dollars. After the quarter, a further $25 billion was issued in July and £4.25 billion in September. In June the company signed a $17.5 billion term loan that could be drawn until September 30, 2026; filings published so far do not show whether it was drawn. Management writes that it intends to undertake additional financing activities in 2026.
- Net cash turned into net debt: at the end of 2025 the company had $54.6 billion of net cash (cash and securities vs notes). On June 30, 2026 it had $9.2 billion of net debt. After the quarter, another $21.3 billion was paid to OpenAI. In addition: $109.8 billion of lease liabilities, and total contractual commitments of $650 billion.
- Investments in private companies: equity and convertible-note investments reached $229.7 billion, 21% of assets. The Anthropic investment is carried at $190.4 billion (preferred stock $92.5 billion and convertible notes $97.9 billion), against a cumulative investment cost of about $18 billion. The OpenAI investment is carried at $28.7 billion at cost, and another $21.3 billion was invested in July. All of this value is a Level 3 measurement, before tax.
Shareholders' equity rose $140.6 billion in six months, to $551.6 billion. Most of it came from revaluations: net income of $92.9 billion that includes about $69 billion of other income, plus $38.1 billion of other comprehensive income, mainly the unrealized gain on the Anthropic convertible notes. Long-term liabilities rose $43.6 billion over the same period, mainly deferred tax on those gains.
Financial debt to trailing operating income before depreciation is about 0.8x, and about 1.4x including leases. The company pays no dividend and did not repurchase shares in the first half of 2025 or of 2026.
Segments
| Q2, $ millions | Revenue 2025 | Revenue 2026 | Change | Segment margin 2025 | Segment margin 2026 |
|---|---|---|---|---|---|
| North America | 100,068 | 116,177 | +16% | 7.5% | 7.9% |
| International | 36,761 | 42,197 | +15% | 4.1% | 4.1% |
| AWS | 30,873 | 42,232 | +37% | 32.9% | 39.4% |
North America: according to the filing, the tariff refunds were recorded "primarily" in this segment. Excluding them, the segment margin was about 7.3%, versus 7.5% in the prior-year quarter. Shipping costs rose 19%, slightly more than units sold (17%). Advertising, which grew 26%, sits inside the retail segments, and the company does not disclose its profitability separately.
AWS: according to the filing, the electricity-contract gain was recorded "primarily" in AWS. Excluding it, the segment margin was about 38.1%, versus 32.9% a year earlier. AWS depreciation rose 67% against a 37% increase in revenue, reaching 19.1% of segment revenue (15.7% a year earlier). Additions to AWS property and equipment were $48.6 billion in the quarter, versus $16.0 billion in the prior-year quarter. At the start of 2025 the company shortened the accounting life of some servers from six to five years.
The backlog: unrecognized performance obligations, mainly AWS, rose from $195 billion in June 2025 to $244 billion in December 2025 and $496 billion in June 2026. The weighted contract life rose from 4.1 to 6.4 years. According to the filing, in Q1 the OpenAI agreement was expanded by $100 billion over 8 years, and in Q2 the Anthropic agreement was expanded by more than $100 billion over 10 years. Together the two expansions are at least $200 billion of the $252 billion six-month increase. The filings do not disclose how much AWS revenue comes from the two companies.
Competitive Position
The differentiation Amazon describes rests on scale and infrastructure: a logistics network that also serves third-party sellers (61% of units sold in the quarter), a Prime membership that ties together delivery, content and shopping, an advertising business with $76.1 billion of revenue over the last 12 months, and a cloud business with a contract backlog of about half a trillion dollars. In AWS, the company develops its own chips (Graviton for general computing, Trainium for AI) alongside servers based on third-party chips.
According to management, the AWS AI business and the chips business have each passed an annual revenue run-rate of $25 billion, with triple-digit growth. These figures appear in the earnings release and are not detailed in the quarterly report. According to the release, Anthropic and OpenAI have made multi-year compute commitments on Trainium.
Where the filings show pressure: antitrust suits in the U.S., Canada and the U.K. (one class action certified in the U.S. and two in the U.K.); a Xockets patent case against AWS server infrastructure, which led the U.S. International Trade Commission to open an investigation in June 2026; and tax disputes in India and Luxembourg. This review does not include primary-source market-share data.
How to Think About This Company
For Amazon in 2026, the central question is how much of its earnings, growth and backlog is tied to money the company itself invested. The operating business shows clear acceleration: AWS growing 37%, advertising 26%, and a 13.7% operating margin. At the same time, the two AI companies Amazon invests in are also customers that filled most of the backlog increase, and the source of most of the quarter's net income. A reader who looks only at the bottom line and one who looks only at operating income will see two different pictures of the same company.
Reported earnings and operating earnings tell different stories. Over the last 12 months, 46% of pre-tax income came from "other income", mainly Anthropic revaluations. The P/E on reported earnings is about 20; on earnings excluding revaluations and one-time items it is about 33–34. At the end of 2025, on the same method, it was about 35. The gap between the two readings is almost the entire valuation question.
The AWS acceleration and its source. AWS growth rose from 17% to 37% over six quarters, and margins rose. Amazon does not disclose how much revenue comes from Anthropic and OpenAI. What the filing does show: the two contract expansions are at least $200 billion of a $252 billion six-month backlog increase. Without them the backlog still grew, but more slowly.
Money flows out and back in several ways. Amazon invested $50 billion in OpenAI and $10 billion in Anthropic stock, and made available to Anthropic a financing facility of up to $20 billion ($15 billion remaining). According to the filing, the facility opens gradually as Amazon delivers compute capacity to Anthropic under the commercial arrangement. In the cash flow statement, the investments leave through investing activities, while customer payments for cloud services come in through operating activities.
Negative free cash flow in a year of record earnings. Operating cash flow rose 33% to $161.4 billion, but property and equipment purchases rose 64% to $169.0 billion, and free cash flow fell to negative $7.6 billion. Equipment worth $29.3 billion was acquired but not yet paid for. About $5.2 billion of the increase in operating cash flow came from lower cash taxes, following IRS guidance on research and development costs.
Depreciation is the other side of the investment. AWS depreciation rose 67% in the quarter, nearly twice the revenue rate. Servers are depreciated over five to six years. The 2025–2026 investment is depreciated through the income statement over the following years, regardless of the pace of new investment.
Retail: advertising grows, margins steady. In North America, excluding tariff refunds, the segment margin was about 7.3% versus 7.5%. International was 4.1%, unchanged. Advertising, which grew 26%, sits inside these segments. In other words, advertising growth did not translate into higher retail segment margins this quarter. The filing does not explain why.
A balance sheet that moved from cash to debt. In six months note debt doubled, and $54.6 billion of net cash became $9.2 billion of net debt. Ratios are still low relative to operating income. But about 42% of shareholders' equity is investments in private companies measured at Level 3. These items — the investments, the backlog and the facility — are all tied to the same two companies.
What was said about next quarter. Management's guidance for Q3 is revenue of $197–202 billion (growth of 9%–12%, or about 4 points more excluding Prime Day), and operating income $22.5–26.5 billion. The guidance assumes no impact from the electricity contracts. In Q1 and Q2 of 2026, actual operating income was above the top of the guidance range.
The framework is meant to organize the questions. It does not decide and does not take part in the decision — the decision is the reader's.
This framework is intended to structure analysis, not to produce an investment conclusion.
Risks & Monitoring
Risks arising from the filings
- Concentration around two companies: investments carried at about $219 billion on June 30 plus $21.3 billion invested in July, at least $200 billion of backlog, and an open financing facility — all with Anthropic and OpenAI. Difficulty at either would affect the revaluation, the backlog and the facility at the same time.
- Level 3 revaluation: the value of the investments is set by funding rounds, with discounts for lack of marketability. A downward revaluation would be recorded directly in net income.
- Funding and leverage: net debt, further issuances per management, and $650 billion of contractual commitments.
- Depreciation and equipment life: a fast technology cycle could shorten server lives again.
- Components and energy: management cites volatility in memory-chip supply and energy prices. The electricity contracts are measured at changing values and can move operating income in either direction.
- Legal and tax: antitrust suits, an ITC patent investigation, tax on cloud services in India and a dispute in Luxembourg; tax contingencies of $7.1 billion.
- Globalstar: an acquisition valued at about $10.9 billion including debt, for cash and stock; according to the company, closing is anticipated in 2027, subject to approvals and milestones.
Items to monitor in the Q3 report (late October 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | Revenue growth excluding the Prime Day effect | Guidance: 9%–12%, about 4 points more excluding it |
| 2 | AWS growth and segment margin excluding electricity contracts | +37%; about 38.1% |
| 3 | Remaining performance obligations, and separately disclosed expansions | $496 billion; 6.4 years |
| 4 | Other income and revaluations | $53.4 billion in the quarter |
| 5 | Free cash flow and equipment not yet paid for | −$7.6 billion; $29.3 billion |
| 6 | Net debt and the term loan | $9.2 billion on June 30 |
| 7 | AWS depreciation vs AWS revenue | +67% vs +37% |
| 8 | North America margin excluding one-time items | About 7.3% |
| 9 | Draws on the Anthropic financing facility | $15 billion available by milestones |
Scenario Framework
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities, and do not rank outcomes. Their sole purpose is to organize the conditions that would need to hold for each state to materialize, so they can be checked against future filings.
Scenarios are descriptive, not predictive.
- If the backlog grows even excluding the Anthropic and OpenAI contract expansions
- If AWS depreciation begins to grow more slowly than AWS revenue
- If advertising growth shows up in retail segment margins
- If operating cash flow again exceeds property and equipment purchases
- If AWS keeps growing fast and capital spending keeps rising with it
- If free cash flow stays around zero and funding continues through notes
- If retail margins move around 2025 levels
- If revaluations keep affecting net income according to funding rounds
- If either AI company reduces its cloud consumption or struggles to raise capital
- If a downward revaluation of the investments is recorded alongside draws on the facility
- If depreciation keeps growing faster than AWS revenue
- If net debt keeps rising at the pace of the first half of 2026
Analytical Lens
The following six questions are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company on the same six dimensions as every other company.
Key Observations
1. In the April–June 2026 quarter Amazon reported revenue of $200.6 billion (+20%) and operating income of $27.5 billion (+43%). The quarter included Prime Day, which in 2025 took place in Q3.
2. Net income was $62.6 billion ($5.75 per share). $53.4 billion of pre-tax income was other income, mainly the revaluation of the Anthropic investment. Excluding it, EPS for the quarter was about $1.94 (our calculation).
3. Over the last 12 months free cash flow was negative $7.6 billion, versus positive $18.2 billion a year earlier. Note debt rose from $68.8 to $132.1 billion in six months.
4. Remaining performance obligations rose from $244 to $496 billion in six months. The contract expansions with OpenAI and Anthropic, both of which Amazon invests in, account for at least $200 billion of the increase.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held an investment advisory license from 2008 to 2023. As of the publication date of this document, the company does not hold an investment advisory, investment marketing, or portfolio management license.
This document is intended for research and professional education purposes only. Nothing herein constitutes a recommendation to buy, sell, hold, or take any action in securities. It is not a substitute for advice that takes into account each person's individual data and needs. Any decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data was drawn from official sources: the Form 10-Q for the quarter ended June 30, 2026 (filed July 31, 2026), the Form 10-Q for Q1 2026, the Form 10-K for 2025 (February 6, 2026), the quarterly earnings releases, and the company's Form 8-K filings with the U.S. Securities and Exchange Commission. Historical multiples: stockanalysis.com. Filing updates published after this date are not included.
Qualified-Client Review — Family Office
The full analytical review of Amazon (AMZN) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company", a structured scenario framework, and a 6-dimension Analytical Lens.
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