[Stock Analysis] Amazon (AMZN): Is It Still a Buy at $235? Record Earnings and a $220B AI Bet

Hey everyone, Hirokichi here.

On July 30, 2026, Amazon reported its second-quarter 2026 earnings, and the numbers made headlines around the world. Revenue topped $200 billion in a single quarter for the first time ever, and shares jumped more than 9% in after-hours trading right after the release. At the same time, Amazon raised its 2026 AI capital expenditure (capex) guidance to $220 billion, which has some investors asking, “the earnings power is real, but is Amazon spending too much?” In this Stock Analysis post, I’ll walk through Amazon’s stock price, earnings, and strategy, and share my own take.

What Kind of Company Is It?

Amazon (NASDAQ: AMZN) was founded in 1994 and today runs three main segments: the North America online store business familiar to shoppers everywhere, an International segment covering markets outside North America, and AWS (Amazon Web Services), its cloud computing business for enterprise customers. On top of that, its advertising business (Amazon Ads) has been growing fast too, with Q2 2026 ad revenue up 26% year over year to roughly $20 billion.

The chart below shows the revenue split for Q2 2026. By dollar amount, the North America online store still accounts for more than half of sales, but AWS dominates on profitability. AWS’s operating margin runs around 40%, and it generates roughly 60% of Amazon’s total operating profit.

As the chart shows, Amazon is shifting from a “low-margin retailer” into a “high-margin cloud and advertising company.”

Stock Price and Valuation

Let’s start with the numbers.

The P/E ratio (how expensive a stock is relative to its earnings) sits around 28x on a trailing basis. Amazon touched an all-time high of $278.56 earlier in 2026, then pulled back to as low as $196.00 amid concerns over AI spending. Shares have now bounced sharply on this earnings beat, so the near-term trend is still hard to call. Worth noting: Amazon has never paid a dividend, choosing instead to reinvest all of its profits back into the business.

For reference, as of July 31, 2026, USD/JPY was trading around 159. That puts a $235.50 share price at roughly 37,600 yen (exchange rates move daily, so treat this as a rough guide only).

Earnings Check

Now let’s look at the earnings trend.

Operating income slumped in fiscal 2022, then staged a V-shaped recovery from fiscal 2023 onward, reaching $80.0 billion in fiscal 2025 (up 17% year over year, an 11.2% operating margin). Revenue has climbed steadily too, hitting $716.9 billion in fiscal 2025.

The latest quarter, Q2 2026, added even more momentum. Revenue rose 20% year over year to $200.6 billion, crossing the $200 billion mark in a single quarter for the first time. Operating income jumped 43% to $27.5 billion. Net income hit a fourth straight quarterly record at $62.6 billion, but it’s worth noting that figure includes $53.4 billion in non-operating gains, mostly from Amazon’s stake in AI company Anthropic. Earnings per share (EPS) came in at $5.75, far above the $1.82 analysts had expected.

AWS was once again the star performer. Revenue grew 37% year over year to $42.2 billion, the fastest growth rate in 18 quarters. Operating income jumped to $16.6 billion from $10.2 billion a year earlier, and AWS’s order backlog has swelled to $496 billion. The numbers make it clear just how strong demand for cloud computing is amid the generative AI boom.

(Source: Amazon.com, Inc. Q2 2026 Earnings Release)

What’s Next: Amazon’s Strategy

Amazon raised its 2026 capital expenditure (capex) guidance from an original $200 billion to $220 billion. The reason is rising memory chip prices, and most of that spending will go toward expanding AWS data centers. CEO Andy Jassy said on the earnings call, “Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too,” underscoring just how tight AI computing capacity has become. Jassy also suggested AWS could eventually become a “trillion-dollar business.”

At the same time, behind this massive investment, Amazon’s free cash flow (cash from operations minus capital spending) has turned negative in the most recent period. The company is plowing more into future investment than it’s currently bringing in, and that’s a point investors are divided on.

Elsewhere, Amazon’s self-driving taxi unit Zoox received a new approval from federal regulators, a sign that the next growth engine is taking shape. The advertising business has also grown into a roughly $20 billion-per-quarter business. Amazon is increasingly a company built on three pillars: retail, cloud, and advertising.

Outlook: Bull and Bear Case

Finally, let’s weigh the factors that could shape the stock going forward.

On the bull side: (1) AWS just posted its fastest growth rate in 18 quarters, with its AI-driven order backlog swelling to $496 billion; (2) the advertising business kept growing at 26% year over year, maturing into a high-margin revenue stream; and (3) major analysts including BofA Securities and BMO Capital raised their price targets after earnings, with the average Wall Street price target now around $313, implying more than 30% upside from current levels.

On the bear side: (1) capex has ballooned to $220 billion and free cash flow has turned negative; (2) rising costs for memory chips and other components could keep pressuring margins; and (3) competition with Microsoft Azure and Google Cloud is only intensifying. One analyst noted that a capex increase “could pressure Amazon shares the same way it did for other big tech stocks that raised their own spending plans.”

Personally, I like that Amazon’s higher-margin businesses, AWS and advertising, keep growing. But with AI spending now this large, I expect the stock to stay volatile as investors try to gauge how quickly that investment will pay off. Rather than getting caught up in short-term price swings, I think it’s worth tracking Amazon’s underlying earnings power, AWS growth and ad revenue growth in particular, quarter by quarter.

Wrap-Up

Amazon’s Q2 2026 earnings were a clean beat: revenue topped $200 billion for the first time, and AWS posted its fastest growth in 18 quarters. At the same time, AI-related capex has climbed to $220 billion a year, and how investors weigh that earnings power against the investment burden will likely be the key question going forward.

Previous stock analysis: [Stock Analysis] Alphabet (GOOGL): Is It Still a Buy at $347? Gemini and NotebookLM vs. the AI Rivals

Related post: [Comparison] VYM vs VOO vs VTI: Understanding the Differences Between 3 Popular U.S. ETFs [2026 Edition]

日本語版はこちら → 【銘柄分析】Amazon(AMZN)は買い時？株価235ドルと過去最高益決算、AI投資2,200億ドル増額の狙いを解説

* This article is for informational purposes only and does not recommend buying or selling any specific stock. Please make investment decisions at your own responsibility.

Thanks for reading, and see you in the next post!

Thanks for reading! If you enjoyed this post, a quick click on the banners below would really encourage me.