Amazon Web Services (AWS), Amazon’s cloud computing division, reported Q2 2026 revenue of $42.2 billion, up 37% year over year and its fastest growth in 18 quarters, or roughly four and a half years. The result exceeded expectations of about 31% growth and consensus revenue of roughly $40.5 billion. AWS reached an annualized revenue rate of about $169 billion, broadly consistent with Morgan Stanley’s approximately $170 billion run-rate estimate. Operating income rose 64% to $16.6 billion, margins reached 39.4%, and AWS generated more than 60% of Amazon’s total operating income. The acceleration supports Morgan Stanley analyst Brian Nowak’s Buy rating, $335 12-month price target, and longer-term scenario in which Amazon shares could approach $500 by the end of 2027 if AI infrastructure drives AWS toward $1 trillion in annual revenue. Amazon’s total Q2 net sales rose 20% to $200.6 billion, while operating income increased 43% to $27.5 billion. The company’s AI infrastructure expansion, including custom Trainium and Inferentia chips and higher capital spending, has supported growth but pushed trailing-twelve-month free cash flow negative despite healthy operating cash flow.