Morgan Stanley's Amazon Earnings Report Analysis Overlooks Key Risks
Amazon (AMZN) reported strong Q2 earnings in July 2026, including $200.6 billion in revenue and a significant increase in net income to $62.6 billion year-over-year. However, much of the net gain was attributed to non-operating pre-tax other income from its investment in Anthropic, raising questions about the practical value of this growth. Morgan Stanley analyst Brian Nowak raised Amazon's price target to $335 and reiterated a 'buy' rating based on AWS performance metrics like the Rule of 70. Despite positive revenue figures, Amazon’s free cash flow turned negative at -$7.6 billion in Q2 due to rising capital expenditures (CapEx), which are expected to reach around $220 billion for 2026—up from previous estimates and insufficient to meet demand. The company also invested an additional $21.3 billion into OpenAI, further straining its financial resources. Morgan Stanley highlighted potential risks including extended investment periods, weaker-than-expected merchandise margins, or declining AWS revenue growth and profitability.
Topics: AI Investments Amazon CapEx Earnings Report Morgan Stanley