Is Amazon a Buy After Its Latest Earnings Report?

Amazon (NASDAQ:AMZN) stock jumped 8% in after-hours trading Thursday after the company reported second-quarter earnings that reflected strong growth in Amazon Web Services and its fast-growing AI and chips businesses.

The company also reported a huge $53.4 billion gain in net income, which it largely attributed to its investment in Anthropic, the start-up AI company that is considering an IPO at a valuation of nearly $1 trillion.

CEO Andy Jassy noted that AWS had its fastest quarterly growth in more than four years, with revenue increasing 36.7% from a year ago. “There’s a lot to be excited about, and we have much more coming for customers in the second half of the year and beyond,” he said in a statement.

Let’s take a closer look at Amazon and why investors are giving its earnings report a thumbs up.

Image source: Amazon.

Amazon’s earnings by the numbers

Amazon wears a lot of hats -- it’s the biggest online retailer in the world, and AWS has the greatest market share among cloud computing companies, holding 28% of the market.

Overall, Amazon’s revenue topped $200.6 billion for the quarter, up 19.6% from a year ago. Sales of the North America segment increased 16% to $116.2 billion, while International segment sales increased 15% to $42.2 billion. AWS sales were also $42.2 billion.

AWS, however, has historically provided the highest profit margin, and that held in the second quarter. AWS generated $16.6 billion in operating income, up from $10.2 billion a year ago. The retail business had much smaller margins -- the North America segment had $9.1 billion in operating income despite more than $116 billion in sales; the International segment had just $1.7 billion in operating income despite nearly identical revenue to AWS.

Amazon said that AWS’s AI business exceeded an annual run rate of $25 billion. The company signed new AWS agreements during the quarter with several prominent companies, including Warner Bros. Discovery, Siemens Energy, Ryanair, Pinterest, Snowflake, and Moody’s.

It also achieved a $25 billion annual run rate for its chips business, which includes its custom-built Trainium AI chip. Amazon has multi-year commitments from Anthropic and OpenAI, as well as Uber Technologies, Pinterest, and several AI start-ups.

The Anthropic investment is also paying off in a big way for Amazon, which invested $13 billion in the AI startup and has the option to invest $20 billion more. Amazon didn’t indicate how much the investment is now worth, but said in a news release that its $53.4 billion in non-operating pre-tax income was primarily attributable to its Anthropic investment.

Not everything is roses, however

While Amazon recorded big revenue gains, its continued investment in AI infrastructure is pressuring the company’s cash position. Amazon reported that free cash flow now stands at negative $7.6 billion for the trailing 12 months, versus a gain of $18.2 billion for the trailing 12 months at the end of Q2 2025.

Amazon also didn’t immediately say whether it was maintaining its capex, which was previously $200 billion this year. Alphabet, like Amazon, also reported strong revenue gains last week and had negative free cash flow. Its stock fell 6% post-earnings after the company disclosed plans to increase its capex spending from $185 billion to $200 billion.

Jassy has previously expressed confidence in Amazon’s spending, saying, “We’re not investing approximately $200 billion in capex in 2026 on a hunch.”

The Anthropic investment gives Amazon some cushion, and its strong revenue growth in its AI and custom chips businesses is a promising sign. Amazon is operating in a position of strength in the cloud, which is why the stock is up after earnings.

Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Moody's, Pinterest, Snowflake, Uber Technologies, and Warner Bros. Discovery. The Motley Fool recommends Siemens Energy Ag. The Motley Fool has a disclosure policy.