I Was Told AI Would Compress Amazon's AWS Margins. Q2 Says Otherwise

Amazon delivered a Q2 AWS operating margin of 39.4%, defying fears of AI-driven margin compression and triggering a sharp positive stock reaction. The company also raised 2026 CapEx guidance by $20B to $220B, but clarified this was due to input inflation, not increased capacity, and the market now underwrites this spend. AWS's $496B backlog, covering 3.3x trailing revenue, and multi-year contract durations support forward visibility and justify continued heavy investment.

I rate AMZN a BUY: the CapEx discount has lifted, but depreciation and negative free cash flow remain near-term risks as monetization lags spend.

If you had been told a week ago that Amazon.com, Inc. ( AMZN ) would go on stage and raise its 2026 CapEx guidance by another ~$20 Billion, what would you have expected the stock to