Amazon (AMZN) Q2 FY26 earnings call: guidance and Q&A

What are the drivers of the 39% AWS operating margin in Q2 and its sustainability? Does Amazon need its own leading frontier model?

Brian attributed strong AWS margins to disciplined efficiency, capacity optimization, and fixed cost management, noting they will fluctuate but are tracking ahead of the core business. Andy stated AWS can be wildly successful without its own frontier model due to Bedrock's comprehensive selection, but they are pursuing one for cost control, prioritization, and speed, expecting it to be one of several top models in Bedrock.

“my view of it is that AWS and Amazon can have a wildly successful business without its own frontier model.”

asked by Doug Anmuth · answered by Andrew Jassy

Was AWS acceleration driven by new capacity coming online? What is the outlook for capacity additions in H2 and 2027?

Andy attributed AWS growth to broad functionality, strong operational performance, security, and AI driving core consumption. He highlighted that 85% of global IT spend is still on-premises, indicating significant cloud migration opportunity. He confirmed they are on track to double power capacity by the end of 2027 compared to 2025.

“we're on pace with the capacity build that we talked about a few quarters ago where we said we expect to have double the capacity -- power capacity by the end of '27 that we had in '25, and we continue to be on that track.”

asked by Justin Post · answered by Andrew Jassy

Can long-lived data center spend slow in 2027? What are the thoughts on selling Trainium to third-party data centers?

Andy stated that demand is very high, with much of 2027 and 2028 capacity already reserved, driven by AI labs, successful generative AI applications, and future enterprise production workloads. He expects AI demand to continue growing significantly. Regarding Trainium, he noted high demand and active exploration of selling chips separately from cloud services, indicating a 'real chance' it will happen.

“we have so much demand right now. Apart from what we've talked about in '26, a lion's share of capacity in '27, we're adding a lot of capacity, as I mentioned just a few minutes ago, is largely reserved. And we have quite a bit of capacity that's already been reserved for '28.”

asked by Brian Nowak · answered by Andrew Jassy

Is there a concerted effort to move into the application layer with services like Kiro and Transform? What are the current thoughts on sources of capital for the build-out?

Andy confirmed a substantial opportunity in agentic applications, driven by customer demand and internal needs, citing Kiro, Quick, Connect, Transform, and Continuum as examples. Brian mentioned debt issuance as an option for funding growth but provided no specific new plans for capital allocation.

“we see a very substantial opportunity, both for our customers and for AWS in building some of these agentic applications.”

asked by Colin Sebastian · answered by Andrew Jassy

How does the growing RPO impact the outlook for 2028 and beyond capacity? How does AWS pricing strategy incorporate future cost inflation?

Andy stated that the growing RPO is factored into CapEx projections and they expect to continue signing more deals. On pricing, he explained that for contracted deals, prices are fixed, but new agreements consider current costs, acknowledging inflated prices for components like memory and hard drives.

“the deals that you signed, those will be the prices and those will be the agreements that we have over the duration of that contract and new agreements that you signed, you always take into account what your costs are and how you ultimately build a price that you agreed to with your customers.”

asked by Kenneth Gawrelski · answered by Andrew Jassy