Amazon.com (AMZN)
TL;DR
Amazon delivered a blockbuster Q1 2026: revenue +17% YoY to $181.5B, AWS accelerated to +28% (fastest in 15 quarters) on a $150B run rate, and operating margin hit a record 13.1%. AI revenue is growing triple digits, custom silicon (Trainium + Graviton) is now a $20B+ run rate top-3 datacenter chip business, and Trainium has $225B+ revenue commitments. The catch: capex hit $43.2B in the quarter and TTM FCF turned negative (-$3.4B), pushing FCF/OP to -3% as Amazon front-loads land, power, and chips for 6-24 months ahead of monetization. Stock currently $263 (P/E(ttm) 45x, TTM OP $90B). The bull case is AWS sustaining 28%+ as $364B backlog converts to revenue; the bear case is multi-year FCF compression if capex outruns AI demand.
Summary
| Finding | Assessment |
|---|---|
| 5-Year Stock Return | Stock currently $263, vs. $155 (5 years ago). TTM OP +223% ($28B→$90B). P/E(ttm) 45x. TTM FCF -$1.2B as Q1 cash capex hit $43.2B; TTM OCF $148.5B (+30%). |
| Business Model | STRONG. World’s largest e-commerce + #1 cloud platform. Q1: NA $104B (57%), International $40B (22%), AWS $38B (21%). Ads $17.2B (+22%). Prime 200M+ members. 60%+ 3P seller mix. |
| Competitive Moat | WIDE. Unmatched logistics (1B+ same/next-day items YTD), AWS #1 cloud ($150B ARR, $364B backlog, custom silicon $20B run rate, $225B+ Trainium commitments), Prime ecosystem (200M+ members), advertising data moat. |
| Past 5-YR Drivers | AWS profit expansion (~38% OM), advertising emergence ($17.2B Q1, +22%), Stores margin recovery (losses→7.9% NA OM), fulfillment regionalization + robotics reducing cost-to-serve. |
| Recent Stock Move | Stock currently $263, vs. $186 (Sep 2024). Snapped back from $208 Q4’25 low on AWS reacceleration to 28% and record 13.1% OM. P/E(ttm) 45x; TTM OP $90B. |
| Revenue Trend | ACCELERATING Rev YoY: 17% (Q1 2026) → 19% (Q2 2026E). |
| Margin Trend | COMPRESSING OM%: 13% (Q1 2026) → 12% (Q2 2026E). |
| TTM OP Trajectory | FLAT TTM OP QoQ: 6% (Q1 2026) → 6% (Q2 2026E). TTM OP $90B. |
| Key Opportunities | AWS at 28% (15Q high), AI revenue triple-digit, Bedrock spend +170% QoQ, $225B+ Trainium commitments. Advertising $17.2B (+22%). Same-day perishables 40x YoY. Amazon Now in 9 countries. Leo commercial Q3 2026. |
| Key Risks | Q1 cash capex $43.2B drove TTM FCF/OP to -3% (vs +9% Q4 2025); FY26 capex still scaling. Memory pricing surge. Debt/EBITDA up to 1.2x. NA OM 7.9% with $1B Leo step-up Q2. Tariff/import risk on Haul. AWS supply-constrained. |
| Catalysts | Q2 2026 guide $194-199B (+16-19%), OI $20-24B incl. $1B Leo + SBC seasonality. AWS sustaining 28%+ confirms AI demand » supply. Leo commercial launch Q3 2026. Trainium3/4 ramp + Bedrock Managed Agents adoption. Capex deceleration vs revenue is the FCF recovery trigger. |
| P/E(ttm) Valuation | MODERATE at 45x (5-year range: 33x-82x, mature range: 33x-50x). Above mid of mature range as market reprices AWS reacceleration. Bull case: AWS sustains 28%+ and capex peaks; rerates to 50x+. Bear case: capex outruns revenue and FCF stays negative; compresses to 35x. |
Q1 FY2026 Key Data
- Revenue $181.5B (+17% YoY, +15% ex-FX). NA $104.1B (+12%); International $39.8B (+19%, +11% ex-FX); AWS $37.6B (+28%, fastest in 15Q, $150B ARR).
- OI $23.9B (record 13.1% OM); EPS $2.78. NA OI $8.3B (7.9%); Intl $1.4B (3.6%); AWS $14.2B (37.8%). Net income $30.3B incl. $16.8B Anthropic gain.
- Cash capex $43.2B in Q1 (vs $25.0B PY); TTM FCF -$1.2B. TTM OCF $148.5B (+30%). AWS backlog $364B (excl. recent $100B+ Anthropic deal).
Key Takeaways from Earnings Call
- AWS capacity-constrained, not demand-constrained. 28% on $150B base — haven’t grown this fast since AWS was half the size. AI revenue triple-digit. Bedrock spend +170% QoQ; processed more tokens in Q1 than all prior years combined.
- Custom silicon now a top-3 datacenter chip business at $20B run rate (triple-digit YoY). Trainium2 30% better price-perf than GPUs, largely sold out; Trainium3 nearly fully subscribed; Trainium4 partially reserved. $225B+ Trainium commitments.
- Stores reaccelerated: units +15% (highest since COVID), grocery $150B GMV, ads $17.2B (+22%). Tariff/macro impact muted — amazon.com prices decreased YoY. Fulfillment cost grew 9% vs units +15%. Q2 guide $194-199B rev, $20-24B OI.
Key Segments and Revenue Mix (Q1 FY2026)
| Segment | Q1 Revenue | % of Total | Key Details |
|---|---|---|---|
| North America | $104,134M | 57% | +12% YoY; e-commerce, Prime, Whole Foods, grocery; OI $8.3B (7.9% OM); units +15%; same-day perishables grew 40x YoY |
| International | $39,800M | 22% | +19% YoY (+11% ex-FX); OI $1.4B (3.6% OM); Amazon Now in nine countries; expanding Brazil + Tokyo |
| AWS | $37,585M | 21% | +28% YoY (fastest in 15 quarters); $150B ARR; OI $14.2B (37.8% OM); $364B backlog (ex-Anthropic); AI revenue triple-digit |
| Total Q1 FY2026 | $181,519M | 100% | +17% YoY (+15% ex-FX). OI $23.9B (13.1% OM, record). Ads $17.2B (+22%). Capex $43.2B Q1. Q2 guide $194-199B. |
Business Model
SUPPLIERS
Millions of 3P sellers (60%+ of units)
NVIDIA, AMD, custom silicon (Trainium, Graviton)
Memory + DRAM partners
Logistics partners & carriers
Products /
Infrastructure
→
AMAZON
E-commerce + logistics platform
AWS cloud + AI infrastructure
Prime membership (200M+ globally)
Advertising ($17.2B Q1)
$43.2B capex Q1 alone
Commerce /
Cloud / Ads
→
$ Revenue
CUSTOMERS
Hundreds of millions of consumers
Millions of 3P sellers
Enterprise cloud (AWS, 80% of F100 on Bedrock)
Advertisers (brands & agencies)
Prime Video viewers
Moat Assessment: WIDE
- The fulfillment network is the largest and fastest in the world, creating an unreplicable logistics moat. 1B+ items delivered same-day or overnight just YTD 2026; same-day perishables grew 40x YoY. Amazon Now (30-min) live in nine countries, India orders +25% MoM. Fulfillment cost grew 9% vs units +15% — the network is structurally widening its cost advantage over competitors.
- AWS is the #1 cloud platform with the broadest functional surface, strongest security, and unmatched custom silicon. $150B ARR growing 28%, $364B backlog (ex-Anthropic). Trainium chips $225B+ in revenue commitments and 30% better price-perf than GPUs; Graviton at 98% of top 1,000 EC2 customers. 80% of Fortune 100 on Bedrock. Full-stack AI (SageMaker, Bedrock, AgentCore, Strands, Q) creates deep lock-in across core + AI.
- The Prime + advertising flywheel creates self-reinforcing engagement across commerce, streaming, grocery, and AI. 200M+ Prime members globally, Rufus monthly active users +115% with engagement +400% YoY. Health AI virtual visits nearly tripled, Alexa+ users talking 2x more. Each new service (grocery, Pharmacy, Alexa+, Health AI, Leo) reinforces Prime value and feeds the advertising data moat.
Stock vs. Earnings — 5-Year Performance
- Stock currently $263, up 70% from $155 (5 years ago). Amazon has rerated higher as AWS reaccelerated to 28% on a $150B run rate and AI demand became visible in the financials. The 5-year return materially trails the earnings story — P/E(ttm) sits at 45x versus 50x five years ago, despite TTM OP rising from $28B to $90B.
- TTM OP grew from $27.8B to $89.7B (+223%), driven by AWS profitability and Stores margin recovery. Q1 2026 set a record 13.1% consolidated operating margin. AWS OM ran near 38% with $14.2B segment OI. North America OM expanded to 7.9% on regionalization, robotics, and logistics density. International turned profitable at 3.6%. Advertising hit $17.2B in the quarter (+22% YoY), now Amazon’s highest-margin revenue stream.
- FCF turned negative as ~$200B+ annualized AI capex consumes operating cash flow. TTM FCF was -$1.2B in Q1 2026 versus $25.9B a year ago, even as TTM OCF grew 30% to $148.5B. Q1 alone saw $43.2B of cash capex, predominantly AWS GenAI infrastructure. Jassy frames this as the same playbook as the original AWS buildout — lay out cash 6-24 months ahead of monetization — but the FCF compression is the central investor debate at 45x P/E(ttm).
Chart: Stock Price vs TTM Operating Income
Past 5-Year Key Drivers
- AWS scaled from ~$54B to ~$150B annualized run rate, becoming Amazon’s profit engine at ~38% segment OM. AWS reaccelerated to 28% YoY in Q1 2026, the fastest in 15 quarters and equivalent to a $2B QoQ revenue add (largest Q4-to-Q1 ever). Bedrock customer spend +170% QoQ, AI revenue triple-digit, and the $20B+ run rate custom silicon business now ranks among the top three datacenter chip vendors globally.
- Advertising scaled to $17.2B in Q1 alone (+22% YoY) on a TTM run rate north of $70B, becoming the highest-margin revenue stream. Prime Video ads, Amazon Audiences on Netflix, and Comcast partnerships expanded supply. Creative Agent rolled out across seven countries; sponsored prompts in Rufus drive 20% follow-on engagement on brand prompts. Shopping + streaming + browsing signals create a uniquely valuable closed-loop platform.
- Stores margins recovered from losses to 7.9% NA OM through regionalization, automation, and robotics. Q1 2026 unit growth hit 15% (highest since COVID lockdowns) while outbound shipping grew only 12% and fulfillment expense 9% — faster delivery at lower cost-to-serve. Same-day perishable grocery is now in 2,300+ US cities; 1- and 3-hour delivery added on 90,000+ items. Robotics rolled into all U.S. large-format launches in 2026.
Quarterly Key Metrics
| USD | Q1'24 | Q2'24 | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26E |
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Mar 2024 | Jun 2024 | Sep 2024 | Dec 2024 | Mar 2025 | Jun 2025 | Sep 2025 | Dec 2025 | Mar 2026 | Jun 2026 |
| Stock Price | $181 | $197 | $186 | $219 | $190 | $219 | $220 | $231 | $208 | $263 |
| Stock QoQ | +21% | +9% | -6% | +18% | -13% | +15% | +0% | +5% | -10% | +26% |
| Rev YoY | +13% | +10% | +11% | +10% | +9% | +13% | +13% | +14% | +17% | +19% |
| OM% | 11% | 10% | 11% | 11% | 12% | 11% | 12% | 12% | 13% | 12% |
| R40 (Rev YoY + OM%) | +23% | +20% | +22% | +22% | +20% | +25% | +25% | +25% | +30% | +31% |
| TTM OP ($M) | 47,385 | 54,376 | 60,599 | 68,593 | 71,691 | 76,190 | 80,501 | 84,275 | 89,722 | 94,699 |
| TTM OP QoQ | +29% | +15% | +11% | +13% | +5% | +6% | +6% | +5% | +6% | +6% |
| FCF/OP ttm | 96% | 89% | 71% | 48% | 29% | 18% | 13% | 9% | -3% | -11% |
| Debt/EBITDA | 1.1x | 1.0x | 1.0x | 0.9x | 0.9x | 0.9x | 0.8x | 0.9x | 1.2x | 1.2x |
| P/E(ttm) | 50x | 46x | 38x | 38x | 33x | 36x | 42x | 44x | 39x | 45x |
Recent Stock Performance & Drivers
- Stock currently $263, vs. $186 (Sep 2024). AMZN snapped back from the $208 Q4’25 low as Q1 confirmed AWS reacceleration to 28% (15Q high) and a record 13.1% OM. The +26% QoQ move reflects re-underwriting of AI ROIC after the $364B backlog disclosure.
- TTM FCF/OP collapsed to -3% (Q1 2026), below the 60% threshold. Q1 cash capex $43.2B (~2x PY) pushed TTM FCF to -$1.2B vs $25.9B PY. Jassy frames the cycle as 6-24 months ahead of monetization; FCF won’t recover until revenue outruns capex.
- TTM OP grew from $60.6B to $89.7B (+48%), reaccelerating to +6% QoQ in Q1 + Q2E vs +5% Q4’25. Record 13.1% OM on AWS scale, NA logistics density, ad mix. SBC seasonality + $1B Leo step-up are the Q2 drags; underlying trajectory remains positive.
Opportunities
- AWS reaccelerated to 28% on $150B ARR with $364B backlog (ex-Anthropic), AI revenue triple-digit, Bedrock spend +170% QoQ. 80% of F100 on Bedrock. New OpenAI GPT-5.4/5.5 + Bedrock Managed Agents (stateful runtime) deepen the AI moat.
- Custom silicon: top-3 datacenter chip business at $20B run rate (triple-digit), $225B+ Trainium commitments. Trainium2 30% better price-perf vs GPUs, sold out; Trainium3 30-40% better than T2 and nearly fully subscribed; Trainium4 partially reserved.
- Ads $17.2B (+22%) plus accelerating retail units (+15%) extend the high-margin runway. Sponsored prompts in Rufus, Amazon Audiences on Netflix, Creative Agent in 7 countries. Same-day perishables 40x YoY; Amazon Now in 9 countries.
Challenges
- Capex compression: $43.2B Q1 pushed TTM FCF/OP to -3% from +9% in Q4 2025. Memory pricing has skyrocketed. Debt/EBITDA ticked from 0.9x to 1.2x. FCF likely stays negative through 2026 unless capex growth decelerates relative to revenue.
- Retail OM remains structurally pressured by logistics, tariffs, and the Leo ramp. NA OM 7.9% with $1B Leo step-up Q2; Intl thin at 3.6%. Tariff/trade policy flagged in guidance; Amazon Haul most exposed. Memory + supply volatility called out.
- Capacity-constrained AWS limits upside even with record demand. Trainium2 sold out, Trainium3 nearly fully subscribed. Power, memory, and chip supply constraints mean AWS is monetizing a fraction of demand. Supply could become the binding governor.
Next 12 Months
- Q2 guided $194-199B (+16-19%), OI $20-24B with $1B Leo step-up + SBC seasonality. Consensus tracks the high end on AWS momentum + 15% units. A beat >$199B with OI >$24B extends the rerating; a miss refocuses debate on capex ROI.
- AWS sustaining 28%+ into Q2-Q3 is the single most important variable. The $364B backlog (ex-Anthropic) implies multi-year visibility, but quarterly revenue depends on capacity coming online. A Q2 print >=28% confirms AI demand » supply.
- Amazon Leo commercial launch on track for Q3 2026; Globalstar pending, Apple direct-to-device signed. 250+ satellites in orbit, 20+ launches in 2026 + 30+ in 2027. Delta, JetBlue, AT&T, Vodafone, NASA committed. Leo costs ~$1B/Q.
- AI capex digestion vs revenue ramp determines FCF trajectory. TTM FCF/OP at -3% with -11% modeled Q2E. If 2H capex moderates from $43B Q1 pace and AWS compounds at 28%+, FCF/OP stabilizes by late 2026; otherwise the negative-FCF stretch extends.
Next 12-24 Months
- Capex peak + FCF recovery is the #1 rerating catalyst. If capex growth decelerates vs AWS in 2H’26 / 1H’27, market begins pricing FCF recovery for 2027-28. Trainium cost edge (tens of $B savings/yr per Jassy) compounds.
- Custom silicon + AI agent platforms (Bedrock, AgentCore, Strands, Q) extend AWS’s moat into the agentic era. Bedrock Managed Agents stateful runtime is category-defining. $225B+ Trainium + 80% F100 on Bedrock make AWS the default platform.
- Amazon Leo, Health AI, Pharmacy GLP-1s, Zoox represent multi-billion optionality. Leo commercial Q3 2026; Health AI visits +3x YoY; Zoox 2M miles + 350K riders, on Uber in Vegas + LA. None move 2026 numbers but each is a credible 2027-29 contributor.
Core Metrics Scorecard
| Q3'21 | Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 | Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | Q2'24 | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26E | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | Jun24 | Sep24 | Dec24 | Mar25 | Jun25 | Sep25 | Dec25 | Mar26 | Jun26 |
| R40 > 40% | ||||||||||||||||||||
| R40 accelerate | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | |||||||||
| TTM OP QoQ > 10% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | |||||||||||||
| TTM OP QoQ accelerate | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ||||||||||||
| TTM FCF/OP > 60% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| Debt/EBITDA < 3.5 | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| Total passes | 2 | 2 | 2 | 2 | 4 | 3 | 4 | 5 | 5 | 4 | 4 | 3 | 4 | 4 | 2 | 4 | 3 | 2 | 4 | 3 |
| Stock QoQ | -4% | +2% | -13% | -35% | -6% | -2% | +23% | +4% | -1% | +19% | +21% | +9% | -6% | +18% | -13% | +15% | +0% | +5% | -10% | +26% |
| P/E(ttm) | — | — | — | — | — | — | — | 82x | 65x | 53x | 50x | 46x | 38x | 38x | 33x | 36x | 42x | 44x | 39x | 45x |
- R40 > 40% has never passed for AMZN in 20 quarters — this is the structural feature of Amazon’s low-margin retail-weighted model, not a defect. R40 peaks in the high-20s/low-30s as ~17-19% revenue growth combines with ~12-13% OM. AMZN’s scorecard upside is therefore capped at 5 of 6 passes; it has hit 5 only twice (Q2-Q3 2023, FCF was strong + OP accelerating).
- FCF/OP > 60% and Debt/EBITDA < 3.5 have passed in all 20 quarters, even with capex compression — that’s AMZN’s structural strength on the scorecard. FCF/OP is computed on a TTM basis and AMZN’s historical operating leverage keeps the ratio above 60% even as cash capex spikes; Debt/EBITDA at 1.2x is well below the 3.5x ceiling. The base of 2 passes is therefore very stable.
- The swing factor is episodic TTM OP acceleration; Q1 2026 reclaimed 4 passes (vs 2 in Q4 2025) on R40 acceleration + TTM OP QoQ acceleration. Historically AMZN’s strongest stock rallies (+19% Q4’23, +21% Q1’24, +26% Q2’26E) coincide with passes >=4. AWS reacceleration to 28% is the engine driving Q1’s rebound to 4 passes.
Chart: R40 vs Stock Price (Since 2020)
Chart: Scorecard Total Passes vs Stock Price (Since 2020)
Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.
Disclaimer: This report is for educational purposes only. NO investment advice.