Amazon Just Posted Its Fastest AWS Growth in 18 Quarters

Amazon printed $5.75 of EPS this week. About $3.80 of it never touched a bank account.

Hold that thought, because the 10% pop itself is deserved. The operating quarter might be the best they have ever reported.

1. AWS grew 36.7%, fastest in 18 quarters, against a street at 31%. $42.2 billion of revenue at a 39.4% operating margin, up 650 basis points from last year. So much for AI diluting cloud margins.

2. Backlog is $496 billion, growing triple digits, average contract life 6.4 years.

3. Advertising up 26%. Paid units up 17%. Even the tariff scare ended as a $600 million refund.

   
   

Now back to that EPS. Amazon booked a $53.4 billion non-operating gain in the quarter. Non-cash. Most of it is Amazon marking up its own stake in Anthropic after Anthropic raised money at a higher valuation. Underlying EPS is closer to $1.95 against the $1.82 consensus. Still a beat, but a very different headline.

The size of the position is the real story. About $18 billion of cash went into Anthropic over three years. The books now carry it around $190 billion. Same quarter, free cash flow went negative for the first time, capex guidance moved from $200 billion to $220 billion, and long-term debt nearly doubled in six months.

There is also a loop in the money flow between Amazon and the two big AI labs that I walk through line by line in the full report. Who pays whom, in what order, and whose backlog it becomes. Every number is in the filings. Nobody on the call asked about it.

Yes, the underlying quarter still beat consensus and the growth is real. Both things are true. The market re-rated the business and the paper gain rode along for free.

Good quarter. Gigantic asterisk. Read the other income line before you chase the pop. Purchase full report here.