Amazon is set to release its second-quarter 2026 earnings report on July 30. Here’s Morningstar’s take on what to look for in Amazon’s earnings and the outlook for its stock.
Key Morningstar Metrics for Amazon
- : USD 280.00Fair Value Estimate
- : ★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
Amazon Earnings Release Date
- Thursday, July 30, after the close of trading
What to Watch for in Amazon’s Q2 Earnings
- Amazon Web Services: AWS is the story, and AI is driving AWS. We will be watching for AWS’ growth, backlog, and capacity additions. We will look for any data points on capacity additions, utilization, and progress on ongoing projects. We will pay close attention to AWS’ margins, as it may struggle with depreciation. It’s important because AWS profitability drives Amazon’s overall profitability.
- Margins: Margin improvements driven by efficiency gains have been a major theme for Amazon over the last year, and we definitely expect more. Amazon Leo (formerly Project Kuiper) expenses have been ramping, weighing on margins (as they did for first-quarter guidance when issued on the fourth-quarter call). We will also look for any insights into additional improvements within Amazon’s overall operations.
- Capex: We will see whether Amazon is on track to meet its USD 200 billion capital expenditure outlook for 2026. We will also look for guidance, though Amazon only guides one quarter at a time, so there will be less to pick apart. Guidance for the second quarter was better than expected when provided on the first quarter call, but because Prime Day fell in the second quarter this year, any commentary on that would be interesting.
The following are excerpts from Morningstar’s company report on Amazon stock.
Fair Value Estimate for Amazon
With its 4-star rating, we believe Amazon’s stock is moderately undervalued compared with our long-term fair value estimate of USD 280, which implies a 2026 enterprise value/sales multiple of 4 times and a negative 1% free cash flow yield. We note that the free cash flow yield is constrained by the significant AWS capacity expansion underway. We think Prime subscriptions and the accompanying benefits, combined with selection, price, and convenience, continue to drive its retail story. We model total retail-related revenue growing at an 8% compound annual growth rate over the next five years.
We believe the critical growth drivers over the medium term will be AWS and advertising, and expect them to drive margins higher over time. Over the next five years, we project AWS revenue to grow at a 20% CAGR and advertising revenue to grow at a 18% CAGR. In total, Amazon should grow at an 11% CAGR through 2030. We model GAAP operating margin expanding from 11% (actual) in 2025 to approximately 14% in 2030 as the company grows into its expanded footprint and optimizes its substantial investment in delivery.
Read more about Amazon’s fair value estimate.
Economic Moat Rating
We assign a wide moat to Amazon, based on network effects, cost advantages, intangible assets, and switching costs. We believe Amazon’s retail business, advertising segment, and Amazon Web Services have wide moats thanks to customer retention, high switching costs, and large scale. We think many of these areas reinforce one another and see little difficulty in Amazon continuing to deliver returns on invested capital well in excess of its cost of capital over the long term.
Read more about Amazon’s economic moat.
Financial Strength
We believe Amazon is financially sound. Revenue is growing rapidly, margins are expanding, the company has unrivaled scale, and the balance sheet is in great shape. As of Dec. 31, 2025, Amazon had USD 123.0 billion in cash and marketable securities, offset by USD 65.6 billion in debt. We also expect near-term pressure on free cash flow generation due to heavy capital expenditure on AWS. As the current investment cycle eases, we see a return to more normal cash flow generation levels.
Given that the company is still in a rapid growth and heavy investment phase, we do not expect it to pay dividends or repurchase shares. The company is acquisitive, but given its size, we characterize all acquisitions throughout its history as tuck-in. We expect the focus to remain on growth, including heavy investment for AWS and delivery.
Read more about Amazon’s financial strength.
Risk and Uncertainty
We assign Amazon an Uncertainty Rating of Medium. Amazon must protect its leading online retailing position, which can be challenging as consumer preferences change and traditional retailers bolster their online presence.
The company must also continue to invest in new offerings. AWS, transportation, and physical stores (both Amazon-branded and Whole Foods) are three notable areas of investment. AI investments for AWS were substantial in 2025 and will remain so in 2026. These decisions require capital allocation and management focus and may play out over a period of years rather than quarters.
Continued international expansion will likely require similar investment and management attention but will also increase exposure to different regulatory environments. In the United States, lawmakers from both parties have increasingly focused on the amount of market power large technology companies have accrued.
From an environmental, social, and governance perspective, data breaches and service outages are a concern for any cloud service provider. As a retailer, Amazon has personal information for hundreds of millions of consumers globally, while AWS hosts proprietary mission-critical data for enterprises.
Read more about Amazon’s risk and uncertainty.
AMZN Bulls Say
- Amazon is the clear leader in e-commerce and enjoys unrivaled scale to continue investing in growth opportunities and drive the best customer experience.
- High-margin advertising and AWS are growing faster than the corporate average, which should continue to boost profitability over the next several years.
- Amazon Prime memberships help attract and retain customers who spend more with Amazon, which reinforces a powerful network effect while bringing in recurring and high-margin revenue.
AMZN Bears Say
- Regulatory concerns are rising for large technology firms, including Amazon. The firm may face increasing regulatory and compliance issues as it expands internationally.
- New investments, notably in fulfillment, delivery, and AWS, should dampen free cash flow growth. AWS investments for AI have been substantial and are likely to remain elevated for several years.
- Amazon may not be as successful in penetrating new retail categories, such as luxury goods, due to consumer preferences and an improved e-commerce experience from larger retailers. The same applies to international expansion.
This article was compiled by Irza Waraich.
