Amazon Before Q2 Earnings: Buy the Stock Now or Wait for Results?

Amazon AMZN is scheduled to report second-quarter 2026 results on July 30.

For the second quarter of 2026, Amazon provided guidance reflecting continued growth expectations. The company anticipates net sales between $194 billion and $199 billion, suggesting 16% to 19% growth compared to the second quarter of 2025, with this guidance anticipating an unfavorable impact of approximately 10 basis points from foreign exchange rates.

The Zacks Consensus Estimate for net sales is pegged at $196.85 billion, indicating growth of 17.38% from the prior-year quarter’s reported figure. The company has been benefiting from its dominant position in the e-commerce and cloud markets. It is also riding on strengthening generative AI capabilities.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.81 per share, reflecting a downward revision of 0.5% over the past 30 days.

Image Source: Zacks Investment Research

AMZN’s Earnings Surprise History

Amazon has a mixed earnings surprise history. In the last reported quarter, the company delivered a negative earnings surprise of 2.5%. The company’s earnings beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average surprise being 11.43%.

Earnings Whispers for AMZN

Our proven model predicts an earnings beat for Amazon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

AMZN has an Earnings ESP of +0.30% and carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping AMZN’s Q1 Results

As Amazon prepares to report second-quarter 2026 results, the company enters the period on a strong footing after a first quarter that topped its own guidance across the board. For the second quarter, Amazon's own guidance calls for operating income of $20-$24 billion compared with $19.2 billion a year earlier — a range that explicitly assumes Prime Day falls within the quarter.

AWS and AI Infrastructure Momentum

AWS remains the central growth engine. First-quarter AWS revenues accelerated to 28% year-over-year growth, its fastest pace in 15 quarters, reaching $37.6 billion with segment operating income of $14.2 billion. The Zacks Consensus Estimate for second-quarter AWS revenues indicates 31.6% year-over-year growth to $40.6 billion. Management disclosed an AWS backlog of $364 billion, excluding a subsequent multibillion-dollar agreement with Anthropic. The chips business, spanning Graviton, Trainium and Nitro, surpassed a $20 billion annualized run rate with triple-digit growth, and Bedrock token processing in the quarter likely exceeded all prior years combined. These dynamics, alongside continued Trainium3 ramp, are likely to have remained the key swing factor for margins entering the second quarter and are expected to have strengthened the segment's positioning against rivals like Microsoft MSFT, Alphabet GOOGL and Oracle ORCL

E-Commerce, Prime and Logistics Strength

The Zacks Consensus Estimate for second-quarter online stores is pegged at $69.5 billion, indicating 13.1% year-over-year growth, while subscription-services revenues are projected at $13.7 billion, indicating an increase of 12.9%. On e-commerce, online stores revenues grew 12% in the first quarter to $64.3 billion, aided by unit growth of 15%, the fastest pace since the pandemic-era peak. Prime Day 2026 was deliberately moved up to June 23-26, a shift management attributed to avoiding overlap with the FIFA World Cup and July 4 holiday. The event drove elevated online spend, according to third-party data, with strength concentrated in electronics, home improvement and appliances. 

Amazon's physical retail operations are expected to show healthy growth, with the Zacks Consensus Estimate projecting physical store sales of $5.86 billion, indicating a 4.8% year-over-year increase.

Third-party seller services also continued expanding, though tariff-driven cost pass-through remained a live issue: Amazon has acknowledged that import-cost pressure is filtering into marketplace pricing, with some sellers absorbing costs and others passing them to consumers. Third-party seller services remain a significant growth driver with the Zacks Consensus Estimate pegged at $46.06 billion, indicating an 14.2% year-over-year increase.

Advertising Services

Advertising continued its outsized contribution, with first-quarter revenues up 24% year over year to $17.2 billion, pushing trailing-12-month advertising revenues above $70 billion. Growth was supported by expanding full-funnel offerings and continued streaming-ad partnerships. The Zacks Consensus Estimate projects second-quarter advertising services revenues at $19.2 billion, indicating 22% year-over-year growth.

Beyond the core segments, Amazon Leo (formerly Project Kuiper) advanced meaningfully during the quarter: enterprise beta launched April 8, 2026, with commercial availability targeted for mid-2026, backed by partner commitments, including Verizon, AT&T, Vodafone and a newly announced Delta Air Lines agreement. Management has guided to roughly $1 billion of incremental Leo-related costs weighing on the quarter.

Balancing these positives, capital intensity remains a genuine concern. At the end of the first quarter, free cash flow on a trailing-12-month basis fell sharply to $1.2 billion, reflecting a $59.3 billion year-over-year increase in property and equipment purchases tied to AI infrastructure. With the 2026 capex program already guided toward $200 billion, investors are likely to scrutinize whether AWS margin gains and advertising strength can continue offsetting elevated depreciation, satellite investment and tariff-related pricing friction heading into the back half of the year.

AMZN Price Performance & Stock Valuation

Shares of Amazon have lost 4.9% in the past six-month period compared with the broader Zacks Retail-Wholesale sector’s decline of 5.8% and the S&P 500 index’s return of 5.6%, respectively.

AMZN’s 6-Month Performance

Image Source: Zacks Investment Research

Now, let’s look at the value Amazon offers investors at current levels. AMZN is trading at a premium with a forward 12-month P/S of 2.81X compared with the Zacks Internet - Commerce industry’s 1.92X, reflecting a stretched valuation.

AMZN’s P/S F12M Ratio Depicts Stretched Valuation

Image Source: Zacks Investment Research

Investment Thesis

Amazon enters second-quarter 2026 results with genuine momentum: AWS reacceleration, record chip demand, expanding advertising and Leo's enterprise beta progress support the long-term growth narrative. Yet elevated capital spending, shrinking free cash flow, tariff-driven pricing pressure on third-party sellers, and roughly a billion dollars in incremental satellite costs continue weighing on near-term profitability. The stock's premium valuation leaves little room for execution missteps, while competition intensifies across cloud, advertising and quick-commerce from well-capitalized rivals. Given this balance of strong fundamentals against stretched pricing and margin uncertainty, investors may be better served holding existing positions or awaiting a more attractive entry point before adding fresh exposure.

Conclusion

Amazon's diversified growth engines and AWS momentum remain compelling, but elevated capital spending, tariff-driven cost pressures and a premium valuation warrant caution. With stiff competition across cloud, advertising and e-commerce, and free cash flow under pressure, investors may be best served holding existing positions rather than initiating new ones, or awaiting a more attractive entry point ahead of second-quarter 2026 results.

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This article originally published on Zacks Investment Research (zacks.com).

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