Amazon's AWS Margin Ignites Profit Potential

Amazon's business is divided into three segments: North American commerce, International commerce, and Amazon Web Services (AWS). In its second quarter of 2026, AWS accounted for 21% of sales but generated a 39% operating margin. This high margin allows the company to grow profits rapidly.

AWS's operating profit rose at a pace of 64% in Q2, outperforming other segments. The company is investing heavily in AWS infrastructure to meet growing demand and sustain its growth rate of 37%. Management notes that AWS will soon face compute constraints, limiting capacity in 2026 and potentially 2027.

Amazon's profits are expected to grow faster than revenue due to AWS's superior operating margin. This phenomenon can create market-crushing stocks, making Amazon a top pick for investors seeking AI-focused companies.