Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTVuk ZdinjakSat, August 1, 2026 at 10:46 PM GMT+2 6 min readAmazon (AMZN) stock closed the July 31 trading session up 15.32% at $271.58, as it soared following the release of its second quarter (Q2) 2026 earnings report on July 30.The stock is up 17.66% year-to-date as of Saturday morning, August 1. Meanwhile, the SPDR S&P 500 index (SPY) is up about 9.55% in the same period.On a superficial level, the earnings look great, but during the artificial intelligence (AI) boom, reading the fine print is more important than ever, as is understanding the larger picture.In a research note shared with me, Morgan Stanley analyst Brian Nowak and his team are bullish on Amazon stock and have lifted their price target to $335 from $330, reiterating an overweight (buy) rating based on a 25x multiple.Amazon reported revenue of $200.6 billion, up 20% year over year.Daniel Mainye/UnsplashAmazon reported revenue of $200.6 billion, up 20% year over year (YoY). Net income increased 243.95% YoY to $62.6 billion.Unfortunately, the impressive net income growth comes with a caveat. As the company noted, Q2 2026 net income includes non-operating pre-tax other income of $53.4 billion, primarily from its investments in Anthropic.That means Amazon's investment in Anthropic, which is a private company, has grown in theoretical value since the investment. The problem is that it is not on the stock market, and the valuation may or may not be of practical value, as we will see later.During the earnings call, Amazon CEO Andy Jassy addressed growing capital expenditures (CapEx):"We now believe we will spend approximately $220 billion in cash CapEx in 2026. The higher cost of memory [is] pushing this number up from our prior estimate of about $200 billion. Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too."High CapEx is already negatively impacting Amazon's free cash flow, and increased CapEx isn't desirable. Free cash flow in Q2 2026 hit a negative $7.6 billion. We need to remember that it was still positive in Q1 at $1.2 billion and reached $18.2 billion in Q2 2025.Along with high CapEx, Amazon has thrown a lot of money into Anthropic's competitor OpenAI.Amazon's Form 10-Q says:"Subsequent to June 30, 2026, we invested the remaining $21.3 billion Commitment Amount in shares of Series C Preferred Stock of OpenAI."According to the Financial Times, this final tranche was finalized in the last week of July.Amazon provided guidance for Q3:Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info