Amazon's Record High Fades as One-Time Gain Exposed

Amazon's stock price surged to a new all-time high after its July 30 earnings report, jumping 15% on the print and pushing the company past a $3 trillion market cap for the first time. However, this record-breaking performance was short-lived as the stock faded by August 5, closing at $272.65, down 1.72% on the day.

The earnings report itself was notable, with Amazon reporting net income of $62.6 billion, or $5.75 per share, more than triple a year ago and miles above the roughly $1.82 the Street modeled. However, most of this profit came from a one-time gain of $53.4 billion from marking up its stake in AI lab Anthropic, which is not reflective of the company's actual business performance.

Looking beyond this headline number, Amazon's operating quarter was still strong, with operating income rising 43% to $27.5 billion and margin expanding from 11.4% to 13.7%. This growth came primarily from AWS revenue, which grew 36.7% to $42.2 billion at a 39.4% operating margin.

However, Amazon's free cash flow took a hit in the quarter, swinging to an outflow of $7.6 billion for the first time since 2023. This was due to a significant increase in property and equipment purchases, almost all of it AI infrastructure spending, which jumped by $66.1 billion year-over-year.