Key Highlights

  • AWS Revenue rose 37% to $42.2 billion in Q2 2026, its fastest growth in 18 quarters, with a $169 billion annualized run rate.
  • The stock closed at $254.98 on Sept. 22, about 11% below its $287.20 record from Aug. 3; no single catalyst for the pullback is clearly identifiable.
  • Qualcomm's Sept. 8 deal gives Amazon warrants for 25 million Qualcomm shares tied to up to $60 billion of chip purchases.
  • Amazon accounts for about 6.35% of the Nasdaq-100, and second-quarter net sales rose 20% to $200.6 billion with Net Income of $62.6 billion.

Amazon's (NASDAQ:AMZN) shares are trading below their record even though Amazon Web Services just posted its fastest growth in 18 quarters. The stock closed at $254.98 on Sept. 22, about 11% below the all-time high of $287.20 set on Aug. 3, 2026. That is despite AWS revenue rising 37% to $42.2 billion in the second quarter.

The precise cause of the pullback from the August peak is not clearly identifiable from company news. The stock has been relatively flat recently, down about 1.4% over the past month but up about 10.5% year to date. The backdrop includes a heavy Investment cycle: Amazon raised its 2026 Capital spending forecast to $220 billion, and its trailing free Cash Flow has turned negative. Those factors may be weighing on the shares, but no single catalyst explains the move.

Amazon accounts for about 6.35% of the Nasdaq-100. Its latest strategic move, a multi-generation custom AI chip Partnership with Qualcomm (NASDAQ:QCOM) announced on Sept. 8, shows how aggressively it is working to secure computing capacity.

A Record AWS Quarter

In its Jul. 30 release, Amazon reported second-quarter net sales of $200.6 billion, up 20% from a year earlier. North America segment sales rose 16% to $116.2 billion, International segment sales rose 15% to $42.2 billion and AWS sales rose 37% to $42.2 billion, putting the cloud unit at an annualized revenue run rate of $169 billion.

Operating income increased 43% to $27.5 billion. AWS contributed $16.6 billion of that, up from $10.2 billion a year earlier, while North America generated $9.1 billion and International $1.7 billion. Net income jumped to $62.6 billion, or $5.75 per diluted share, but that figure included $53.4 billion of pre-tax non-operating income, mainly from Amazon's investments in Anthropic.

"AWS is booming, growing 36.7% year-over-year in Q2, our fastest growth in 18 quarters, and our AI and Chips businesses each eclipsed run rates of more than $25 billion," Chief Executive Officer Andy Jassy said in the release. AWS growth handily beat the 31.21% consensus compiled by LSEG, Advertising sales rose 26% to $19.8 billion and AWS's contract Backlog climbed to $496 billion from $364 billion a quarter earlier. The shares rose nearly 9% after hours on Jul. 30.

Guidance and the Cash Flow Trade-Off

For the third quarter, Amazon guided to net sales of $197.0 billion to $202.0 billion, up 9% to 12% year over year. The company said growth would be nearly 400 basis points higher excluding the effect of Prime Day timing in 2025 and 2026. It expects Operating Income of $22.5 billion to $26.5 billion, compared with $17.4 billion a year earlier.

The cost of that growth is visible in cash flow. Operating Cash Flow rose 33% to $161.4 billion on a trailing 12-month basis, but free cash flow swung to an outflow of $7.6 billion, compared with an inflow of $18.2 billion a year earlier. Amazon said the change primarily reflected a $66.1 billion increase in purchases of property and equipment, mostly for artificial intelligence.

Jassy said memory chip costs were a key Factor behind the higher $220 billion capital spending forecast, and that "even at that amount, we will still not have enough capacity to meet all of the Demand we have in 2026."

What the Qualcomm Deal Adds

On Sept. 8, Qualcomm (NASDAQ:QCOM) announced a Data Center partnership with AWS covering "multiple generations of customized silicon" for AI infrastructure, with a focus on inference. In an SEC filing, Qualcomm said it issued Amazon warrants to acquire 25 million Qualcomm shares at $161.26 each, worth about $4 billion in total.

The warrants vest in tranches tied to the execution of certain commercial arrangements and to Amazon's purchases of up to $60 billion of Qualcomm server chips and other technology, and they expire on Sept. 3, 2036. For Amazon, the arrangement adds another custom-silicon supplier alongside its own chip efforts, which Jassy said already exceed a $25 billion run rate. For Qualcomm, it is a second hyperscaler endorsement after Meta (NASDAQ:META) agreed to use its Dragonfly C1000 data center CPU.

Competitive Pressure in the Cloud

AWS remains the largest cloud provider, but rivals are growing faster from smaller bases. Alphabet (NASDAQ:GOOGL) reported 82% Google Cloud growth for the June quarter, and Microsoft (NASDAQ:MSFT) said Azure grew 43%. AWS's reacceleration to 37% helps answer concerns that it was losing ground, but investors are likely to keep comparing growth rates, backlog and capacity additions across the three providers.

By a simple calculation from the reported growth rates, AWS added roughly $11.3 billion of quarterly revenue year over year, while Google Cloud added about $11.2 billion, a sign of how quickly the gap in absolute dollars is narrowing. Microsoft, Alphabet and Meta also reported sharp drops in free cash flow as they increased AI spending.

Risks Behind the Rally and the Retreat

The main risk is capital intensity. A $220 billion spending plan and negative trailing free cash flow leave Amazon exposed if AI demand or pricing softens, and Jassy's warning that capacity will still fall short suggests spending pressure could extend into 2027. Rising memory costs add to that burden. The large Anthropic-related gains that lifted net income are non-operating and can swing between quarters. The Qualcomm warrants depend on purchase milestones, so the full value of the deal will take years to show up. Retail growth of 15% to 16% is solid but slower than AWS, and consumer spending remains a variable in the holiday quarter.

The Next Read on AWS Momentum

Amazon's third-quarter results, typically released in late October, are the next major test, although a date has not yet been announced. Investors will look at whether AWS sustains growth in the high 30% range, whether operating income lands in the $22.5 billion to $26.5 billion guided range and how capital spending tracks against the $220 billion plan.

Further details on the Qualcomm silicon roadmap and AWS's annual re:Invent conference, traditionally held in early December, could also shape sentiment as the stock trades below its August record.