Key Highlights

  • AWS acceleration: Amazon Web Services grew about 37% year over year in Q2 2026, its fastest expansion since 2021.
  • Group scale: Total company Revenue topped $200 billion in the quarter, with AWS attributed as the primary driver of the acceleration.
  • Profit concentration: AWS generates the majority of Amazon's operating profit despite retail producing the larger share of revenue.
  • Custom silicon: Amazon's own AI chips, designed to run workloads more cheaply, are viewed as a key lever for improving cloud margins.

Amazon Web Services (NASDAQ:AMZN), long the profit engine behind a company still best known for parcels, has reaccelerated, and that gives Nasdaq 100 investors a fresh reason to look closely at Amazon. After a period when its cloud growth lagged faster-moving rivals, AWS has found a higher gear, and the reason is the same one driving much of the index: artificial intelligence.

What Amazon Does

Amazon operates in two very different worlds. It is the largest online retailer in much of the West, running a vast logistics and marketplace operation, and it is also, through AWS, the world's biggest provider of cloud-computing infrastructure. That cloud arm, though smaller in revenue than retail, generates the majority of Amazon's operating profit, which is why investors watch it so intently. Amazon sits within the consumer-discretionary sector but trades increasingly on its technology credentials.

AWS Finds a Higher Gear

In the second quarter of 2026 Amazon reported that AWS grew about 37 per cent year on year, described as its fastest expansion since 2021, while group revenue topped 200 billion US dollars. The company attributed the acceleration to Demand for AI services and for the custom chips it has designed to run them more cheaply. That is a meaningful shift: for a couple of years AWS had been growing more slowly than Microsoft's Azure and Google Cloud, prompting questions about whether Amazon had ceded its lead. A return to brisk growth answers some of those doubts.

Why it Matters for the Nasdaq 100

Amazon is one of the index's largest constituents, so its direction affects the whole benchmark. AWS also sits at the centre of the AI Investment story, both as a huge buyer of chips and as a seller of computing power. When AWS grows quickly, it signals that businesses are still committing budgets to cloud and AI, a read-across that matters for many other index members. Amazon's scale means it is both a participant in and a barometer of that spending cycle.

The Risks to Weigh

The retail Business runs on thin margins and is sensitive to consumer confidence, wage costs and fuel prices, so a weakening economy would hurt. Cloud growth, while welcome, requires heavy Capital Investment in data centres and chips, pressuring free cash flow. Competition remains fierce across both retail and cloud. And, as with its peers, there is a risk that AI demand proves lumpier than the current enthusiasm implies, leaving expensive capacity underused.

What to Watch Next

Readers should track the AWS growth rate quarter by quarter, since it is the cleanest measure of cloud momentum and the biggest driver of profit. Operating margins in the cloud division reveal whether growth is coming at a reasonable cost. Capital-expenditure figures show how aggressively Amazon is building for future demand. On the retail side, watch commentary on consumer spending and on the profitability of the logistics network, which has been a focus of efficiency efforts. Finally, watch adoption of Amazon's in-house AI chips, because success there would improve margins and reduce its dependence on external suppliers, strengthening the long-term case while easing the cost pressures that come with rapid cloud expansion across the group's data-centre footprint.

Cloud Profit Carries the Retail Giant

There is a further reason AWS matters so much to Amazon's valuation. Retail is an enormous business, but it earns thin margins and must reinvest heavily, whereas cloud generates the bulk of operating profit on a far smaller revenue base. So even modest changes in the pace of AWS growth have an outsized effect on group profitability and on how investors value the whole company. The reacceleration also eases a nagging worry that Amazon had permanently lost ground to nimbler cloud rivals, a narrative that had weighed on sentiment and shaped how the market judged its prospects.