Amazon reported first-quarter 2026 net sales of $181.5 billion, a 17 percent increase year on year that exceeded analyst estimates by more than $4 billion. Net income reached $30.3 billion, nearly doubling from $17.1 billion in the same period last year. Earnings per share came in at $2.78, crushing the $1.64 consensus.
The Anthropic paper gain
Roughly $16.8 billion of Amazon's pre-tax income for the quarter came from a revaluation of its investment in Anthropic, the AI company behind the Claude family of models. Amazon has committed up to $25 billion to Anthropic. A portion of that investment was converted from convertible notes into preferred stock during the quarter, triggered by Anthropic's most recent funding round. The accounting gain pushed Amazon's $8 billion cumulative investment in Anthropic to a mark-to-market value exceeding $70 billion.
Strip out the Anthropic gain, and Amazon's operating profit was $23.9 billion — still strong, but the distinction matters. More than half of the net income that drove the earnings-per-share beat came not from selling products or cloud services but from owning a piece of a company that has not yet turned profitable.
AWS and custom chips
AWS revenue grew 28 percent to $37.6 billion, its fastest growth rate in more than three years. Operating income from AWS reached $14.2 billion, above the $12.8 billion consensus. CEO Andy Jassy told analysts that AWS demand continues to outpace supply, with the backlog growing as enterprise customers commit to multi-year cloud and AI contracts.
Amazon's custom chip business — covering Trainium, Graviton, and Nitro — now generates more than $20 billion in annualized revenue growing at triple-digit rates. Trainium2, Amazon's AI training and inference accelerator, has largely sold out. The next generation, Trainium3, which began shipping in early 2026, is nearly fully subscribed. Uber joined Amazon's Trainium customer roster during the quarter, and Meta signed a multibillion-dollar deal for Graviton5 processors.
The cash flow problem
Amazon's trailing twelve-month free cash flow compressed to $1.2 billion, a 95 percent decline year on year. The collapse is almost entirely attributable to capital expenditure. Amazon spent $44.2 billion in the quarter on data centers, networking equipment, custom chips, and the physical infrastructure required to meet AI demand. The company has committed approximately $200 billion in total capex for 2026.
Operating income of $23.9 billion is healthy. Free cash flow of $1.2 billion is not. The Anthrop