Amazon reported second-quarter revenue of $200.6 billion on Thursday evening, up 20 percent year over year. AWS reached $42.2 billion, growing 37 percent for its fastest quarter since 2021. CEO Andy Jassy said the company's AI and custom chips businesses each exceeded a $25 billion annual run rate. The stock climbed roughly 8 percent after hours.
The headline was net income: $62.6 billion, more than triple the year-ago quarter. Earnings per share came in at $5.75, up from $1.68. But the number contained a structural disclosure that changes the reading entirely.
The Composition
Amazon reported $53.4 billion in non-operating pre-tax income, primarily from unrealized gains on its investment in Anthropic. Operating income, the number that reflects the business Amazon actually runs, was $27.5 billion, up 43 percent and genuinely strong. But 85 percent of the reported net income came from the paper appreciation of an equity stake in a company that is also one of Amazon's largest cloud customers.
Amazon has invested roughly $8 billion in Anthropic to date, with agreements to invest up to $25 billion more. In April, Anthropic committed to directing more than $100 billion toward AWS over the next decade. The single-quarter investment gain now exceeds the quarterly revenue of the cloud division serving that same customer. Amazon earned more this quarter from owning a fraction of Anthropic than from running all of AWS for ninety days.
The Circuit
Microsoft reported a $3.2 billion gain on its own Anthropic stake this same week, while Anthropic has committed $30 billion in Azure spending. At Microsoft, the investment gain supplemented operating earnings. At Amazon, the investment gain was the earnings.
Two companies, same counterparty, same structure: invest in the AI lab, sell the AI lab cloud compute, book the AI lab's rising valuation as income. Amazon invests in Anthropic. Anthropic buys AWS. AWS revenue grows 37 percent. Growth justifies $220 billion in capex. Capex builds more cloud infrastructure. Anthropic rents it. Anthropic's compute commitments support its rising valuation. The rising valuation flows back to Amazon as a $53.4 billion unrealized gain. The circuit completes. The market calls it earnings.
The Guidance
Amazon raised its 2026 capital expenditure forecast from $200 billion to $220 billion. Jassy cited higher memory costs. Memory prices doubled this year as data centers consumed the majority of global DRAM production. Even at $220 billion, Jassy said, the company will not have enough capacity to meet demand in 2026 or 2027.
Third-quarter revenue guidance came in at $197 billion to $202 billion, below the $204 billion consensus. The operating business is decelerating while AWS growth is accelerating and the investment gain is inflating. Three readings from the same company pointing in different directions. The market chose the total. The stock went up.
The Week
This was the week the hyperscalers reported. Microsoft beat on Azure and Anthropic gains. Meta beat on revenue but free cash flow collapsed 91 percent as $31.1 billion in quarterly capex consumed nearly all operating cash flow. Apple reported record revenue and margins while spending more than sixty times less on capex than its competitors combined. Amazon beat while 85 percent of net income was unrealized appreciation.
Combined 2026 capex for the four largest cloud providers now approaches $750 billion with Amazon's revised figure. Each dollar builds infrastructure that AI companies rent. Each rental increases AI company revenue and valuation. Each valuation increase flows back to the cloud providers as investment gains on the balance sheet. The week produced four earnings beats. The money that produced them has not left the system.
The return is real in the sense that the numbers appear on the ledger. It is circular in the sense that the dollars touch each node and count themselves at every stop.