Artificial intelligence (AI) has gone from a futuristic concept to one of the biggest forces driving the stock market, rewarding companies that are successfully capitalizing on the technology. And among some of the biggest beneficiaries of this shift is Amazon.com (AMZN). Beyond dominating e-commerce, Amazon has emerged as a key player in AI through its Amazon Web Services (AWS) division, where growing demand for cloud-based AI solutions has accelerated revenue growth in recent quarters.
However, despite the long-term tailwinds, the stock has lately lost momentum as investors grapple with concerns over the company's massive AI capital expenditures, coupled with recent allegations surrounding Chinese influence on its third-party marketplace, which have weighed on sentiment. And now, all eyes are on Amazon's second-quarter earnings report, due after market hours on Thursday, July 30, a release that could either reinforce confidence in its AI strategy or deepen concerns about spending and valuation.
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With broader markets also questioning the sustainability of AI-driven gains and the growing concentration of the S&P 500 Index’s ($SPX) performance among a handful of tech giants, Amazon's results could prove to be a pivotal moment for the stock.
About Amazon Stock
Seattle-based Amazon may have started by reinventing online shopping, but its transformation into one of the world's most influential technology companies has been remarkable. What began as an e-commerce disruptor has evolved into a powerhouse spanning cloud computing, AI, data centers, and digital media, placing Amazon at the center of how consumers shop, businesses operate, and people consume digital content.
Its footprint in entertainment is equally impressive, with platforms such as Prime Video, Amazon Music, Twitch, and its gaming ecosystem helping the company establish a strong presence in the global streaming and digital media market. At the core of Amazon's next phase of growth is AWS, the company's highly profitable cloud business that sits at the heart of the AI revolution.
By providing the infrastructure that powers startups, enterprises, and governments worldwide, AWS has become one of the biggest beneficiaries of surging AI demand. Amazon is now doubling down on this opportunity, ramping up investments in AI infrastructure and data centers as it seeks to strengthen its leadership in the next wave of technological innovation. But despite its compelling long-term AI story, Amazon's stock has struggled to gain traction.
With a market capitalization of roughly $2.49 trillion, the shares have traded largely sideways over the past year and have posted marginal losses in 2026, significantly underperforming the broader S&P 500 Index, which has climbed 16.6% over the past year and 8.8% year-to-date (YTD). Investor sentiment has been weighed down by concerns over Amazon's soaring AI-related capital expenditures, a United States Senate investigation into its third-party marketplace, and broader caution toward mega-cap technology stocks ahead of the company's upcoming earnings report. Reflecting those concerns, Amazon shares remain nearly 17% below their all-time high of $278.56, reached on May 5.
www.barchart.com Inside Amazon’s Q1 Earnings Report
Amazon's fiscal 2026 first-quarter earnings report, released on April 29, offered a reassuring message to investors. Despite mounting concerns over the company's aggressive AI spending, its underlying business remains on solid footing. Net sales climbed 17% year-over-year (YOY) to $181.5 billion in the quarter, up from $155.7 billion in the first quarter of 2025. Excluding a favorable $2.9 billion impact from foreign exchange movements, net sales still grew an impressive 15% YOY, comfortably surpassing Wall Street's revenue estimate of $177.2 billion.
The biggest driver of this outperformance was AWS, where revenue accelerated 28% YOY to $37.6 billion. Highlighting the strength of its AI ecosystem, management noted that AWS recorded its fastest growth in 15 quarters, while Amazon's custom AI chips business, which includes Graviton, Trainium, and Nitro, surpassed a $20 billion annualized revenue run rate and continues to grow at a triple-digit pace YOY. AWS operating income climbed to $14.2 billion, underscoring that enterprise demand for cloud infrastructure and AI services remains exceptionally strong.
Amazon's core retail operations also delivered impressive results. Sales in the North America segment rose 12% to $104.1 billion, while the International segment posted an even stronger 19% increase to $39.8 billion. Meanwhile, worldwide unit sales grew 15%, marking Amazon's fastest expansion in unit volume since the post-pandemic period and signaling healthy consumer demand across its global marketplace.
Profitability was equally impressive. Earnings per share (EPS) surged 74.8% YOY to $2.78, crushing analysts' expectations of $1.64. The strong earnings performance was supported by solid operational execution across the business, along with non-operating valuation gains from Amazon's strategic investments. Cash generation also remained robust. Operating cash flow increased 30% to $148.5 billion over the trailing 12 months, compared with $113.9 billion in the corresponding period a year earlier.
However, free cash flow declined sharply to $1.2 billion from $25.9 billion, primarily because purchases of property and equipment, net of proceeds from sales and incentives, increased by $59.3 billion YOY. The bulk of that spending reflects Amazon's aggressive investments in AI infrastructure and data centers, reinforcing management's long-term commitment to expanding its AI capabilities.
Looking ahead, Amazon appears confident that its momentum will continue. For the second quarter of fiscal 2026, management expects net sales between $194 billion and $199 billion, representing 16% to 19% YOY growth. The company projects operating income of $20 billion to $24 billion, up from $19.2 billion reported in the second quarter of 2025, setting the stage for another closely watched earnings release.
What Do Analysts Think About Amazon Stock?
Wall Street remains overwhelmingly bullish on Amazon ahead of its highly anticipated second-quarter earnings report, with the stock earning a consensus "Strong Buy" rating. Among the 57 analysts covering the company, 49 recommend a "Strong Buy," five rate it a "Moderate Buy," and only three suggest "Hold." The Street also sees considerable upside ahead, with the average price target of $315.25 implying a potential 36% gain from current levels.
Even more bullish is the highest price target of $370, which points to a possible 59.7% upside, underscoring analysts' confidence in Amazon's long-term growth prospects despite near-term concerns surrounding AI spending and regulatory scrutiny.
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www.barchart.com On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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