Amazon's AWS Operating Income Rises 63% in Q2 as Trailing Free Cash Flow Turns Negative
Amazon Web Services reported second-quarter 2026 operating income of $16.6 billion, up from $10.2 billion a year earlier, in results Amazon published on July 30. Operating income is revenue minus operating costs, before interest and taxes. For the cloud unit, it is the line that isolates profitability from the rest of the company, which includes the retail business.
The year-over-year increase works out to about 63%. The first quarter showed a much smaller gain: AWS operating income of $14.2 billion, against $11.5 billion in Q1 2025, or roughly 23%. In the prior year, Q2 2025 had risen only about 10% from $9.3 billion in Q2 2024. Profit growth at the unit has therefore moved sharply over the past four quarters, and the comparison base for the next several reports is now considerably higher.
Consolidated net income rose to $62.6 billion in the second quarter, compared with $30.3 billion in Q1 2026 and $18.2 billion in Q2 2025. Net income is an accounting figure that includes items outside operating results, so it moves differently from the AWS line. Readers should not treat it as a measure of cloud economics. The gap between the two is worth noting, but it does not tell you much on its own.
Cash is the more sobering number. Bloomberg reported a free cash flow outflow of $7.6 billion for the trailing 12 months at quarter's end. Free cash flow is operating cash flow less capital expenditures. A negative trailing figure means that over the prior year, spending on data centers, networking and other equipment exceeded the cash the company generated from its operations. Set that against $62.6 billion of quarterly net income and the mismatch is plain: accounting profit and cash generation are running on different tracks. For an investor, the question is how long the build-out runs ahead of the cash it eventually produces, and the trailing number does not answer that.
The sales trajectory is the other half of the story. AWS segment sales rose 20% year over year to $33.0 billion in Q3 2025, according to Amazon's third-quarter release, and climbed 24% to $35.6 billion in the fourth quarter, per its February 2026 results. Growth in sales was steady and accelerating into year-end. Operating income has grown faster than sales in the most recent quarters, which points to margin expansion.
Investors were positioned around the next print. The Globe and Mail reported that Amazon shares fell on Oct. 29, ahead of the company's after-hours third-quarter earnings report. Attention was on AWS cloud growth, and the article's headline pointed to capital expenditure concerns. That focus is consistent with the cash picture above. When a company spends heavily on infrastructure, the market tends to price the return on that spending before the spending shows up in reported earnings.
The practical takeaway for anyone holding Amazon exposure, directly or through a fund, is that the cloud unit's profit trend is strong on the operating line and the cash trend is less clear. The third-quarter figures, released after the close on Oct. 29, are the first test of whether the second-quarter profit acceleration held and whether the cash shortfall is narrowing. I would read them against the operating income and trailing free cash flow lines together, not against net income alone.
