Amazon.com, Inc. (AMZN) Narrative

Sources: Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (filed February 6, 2026, accession 0001018724-26-000004) and Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (filed April 30, 2026, accession 0001018724-26-000014).

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Business

From the FY2025 10-K, accession 0001018724-26-000004.

Amazon describes itself as seeking to be "Earth's most customer-centric company," guided by four stated principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. It serves six customer sets, consumers, sellers, developers/enterprises, content creators, advertisers, and employees.

Three reportable segments:

• North America, retail sales of consumer products (own inventory and third-party sellers), plus advertising and subscription services through North America-focused online and physical stores. Includes export sales from those stores.
• International, the same activities through internationally-focused online stores, including their export sales (including exports into the U.S., Mexico, and Canada), but excluding exports from the North America-focused stores.
• AWS, global sales of compute, storage, database, analytics, artificial intelligence and machine learning, and other on-demand technology services to start-ups, enterprises, government agencies, and academic institutions.

How the money is made. Product sales are recognized gross (goods Amazon buys for resale, plus digital media where revenue is gross). Service sales are largely net-share revenue and fee streams: third-party seller fees (commissions plus related fulfillment and shipping fees), AWS, advertising, Prime membership fees, and certain digital content subscriptions. For sellers, Amazon is not the seller of record and earns fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination.

FY2025 net sales by product/service group (in millions, 2023 / 2024 / 2025):

Segment results (in millions):

AWS was 18% of 2025 net sales but 57% of consolidated operating income.

Physical footprint. As of December 31, 2025: 741.5 million leased and 78.1 million owned square feet, of which fulfillment/data centers/other accounted for 474.1 million leased and 45.8 million owned in North America and 185.8 million leased and 20.7 million owned internationally. 615 North America and 8 International physical stores.

Employees. Approximately 1,576,000 full-time and part-time employees as of December 31, 2025, supplemented by independent contractors and temporary personnel. Over 300,000 employees globally have participated in Amazon Career Choice.

Seasonality. Higher sales volume historically falls in the fourth quarter.

Adjacent build-outs disclosed in the filings. A satellite network for global broadband service (branded Amazon Leo), autonomous vehicles for ride-hailing, healthcare services, and Amazon-designed AWS chips. Costs of the satellite network, production, launch, payroll, and launch-services deposits upon launch, are largely expensed today; Amazon will capitalize certain of these only once the service reaches commercial viability, including sales to customers.

Leadership (as of January 28, 2026): Jeffrey P. Bezos, Executive Chair (founder, 1994; CEO May 1996–July 2021); Andrew R. Jassy, President and CEO since July 2021; Matthew S. Garman, CEO of AWS since June 2024; Douglas J. Herrington, CEO Worldwide Amazon Stores since July 2022; Brian T. Olsavsky, SVP and CFO since June 2015; Shelley L. Reynolds, VP, Worldwide Controller and Principal Accounting Officer since April 2007; David A. Zapolsky, SVP, Chief Global Affairs & Legal Officer since February 2025.

Competition. Amazon lists ten categories of competitor, spanning physical/e-commerce/omnichannel retail, media producers and distributors, search engines and social networks (including AI-based discovery), e-commerce services providers, logistics providers, IT and cloud/AI infrastructure providers, consumer electronics makers, grocers, advertising firms, and healthcare providers. It names selection, price, and convenience (fast, reliable fulfillment) as the principal competitive factors in retail, and quality, speed, and reliability of services, plus customers' willingness to change business practices, for seller and enterprise services. It notes that the internet and AI lower barriers to entry and enhance comparison shopping.

Management's stated financial frame. The focus is long-term, sustainable growth in free cash flow, driven by growing operating income and efficiently managing receivables, inventory, payables, and cash capex (including the lease-versus-buy decision). Amazon seeks to reduce variable costs per unit and leverage fixed costs, to turn inventory quickly and collect from consumers before paying vendors and sellers, and to manage shareholder dilution while using restricted stock units as the primary equity-compensation vehicle. It explicitly expects technology and infrastructure spending to keep rising, which "can negatively impact short-term free cash flow", to support long-term growth including AI and machine learning.

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Risk factors

Condensed from the FY2025 10-K, accession 0001018724-26-000004, updated where the Q1 2026 10-Q (accession 0001018724-26-000014) restates them.

Business and industry

• Intense competition across many fronts. Businesses are "rapidly evolving and intensely competitive" across geographies and industries. Some competitors have greater resources, longer histories, more customers, and greater brand recognition, and may secure better vendor terms, price more aggressively, and spend more on technology, infrastructure, fulfillment, and marketing. New technologies, search, cloud, AI/ML, digital content, satellites, devices, keep increasing competition, and AI in particular lowers entry barriers.
• Expansion into new products, services, technologies, and geographies. Limited or no experience in newer segments; customers may not adopt. Profitability of newer activities, including automation and AI/ML development for customer and internal use, may not meet expectations, and investments are "often significant." Failure to realize the benefits could force write-downs or write-offs.
• International operations. Significant to revenues and profits, may not become profitable on a sustained basis, and are exposed to local economic and political conditions, restrictive governmental actions (trade protection, export duties, quotas, customs duties and tariffs, import/export restrictions, nationalization, foreign-ownership limits), licensing requirements, repatriation and FX restrictions, longer receivable cycles, privacy/data-localization rules, lower internet and card usage, works councils and labor unions, FCPA compliance, and tariff/trade and tax policy. Local competitors may hold an advantage through better understanding of local customers and established brands.
• China and India specifically. Both regulate Amazon's in-country businesses through ownership, licensing, and content rules. In China Amazon provides certain technology services through contractual relationships with third parties holding PRC licenses; in India, where foreign ownership of multi-brand online retail is restricted, Amazon provides marketing tools and logistics to third-party sellers and holds an indirect minority interest in an entity that is a seller on amazon.in. Amazon states these structures "involve unique risks" and that regulators may ultimately take a contrary view, potentially resulting in fines, revoked licenses, forced restructuring, or shutdown. Separately, China-based sellers account for significant portions of third-party seller-services and advertising revenue, and China-based suppliers provide significant portions of components and finished goods, so trade restrictions and tariff changes there flow directly into results.
• Foreign exchange. International results and certain intercompany balances are exposed to rate moves; exposure has grown with international expansion.

Operating

• Scale strain. Rapid, significant global expansion, product and service breadth, infrastructure scaling, AI/ML adoption, strains management, personnel, operations, systems, financial resources, and internal control and reporting functions.
• Fluctuating operating results and growth rate. Expense levels and investment plans are set on sales estimates; a significant portion of expenses and investments is fixed and cannot be adjusted quickly. Revenue growth "may not be sustainable."
• Retail variability and seasonality. A disproportionate amount of retail sales occur in Q4; understocking costs revenue, overstocking forces markdowns and write-offs. Net shipping cost rises with complimentary upgrades, split shipments, and long-zone shipments to hit holiday delivery. Cash and marketable securities typically peak at December 31 (consumers pay by card and receivables settle quickly, with a matching accounts-payable increase), then decline through the first three months of the year as vendors and sellers are paid.
• Fulfillment network and data centers. Failure to predict demand results in excess or insufficient fulfillment or data center capacity, service interruptions, increased costs, and impairment charges. Regional labor market constraints raise payroll costs and make it hard to staff the network. Amazon relies on a limited number of shipping companies.
• Data loss and security incidents. Amazon collects, processes, stores, and transmits large volumes of confidential, classified, sensitive, proprietary, and personal data; its measures "cannot provide absolute security" and may be circumvented, including by use of developing technologies such as AI.
• System interruption and lack of redundancy. Systems "are not fully redundant" and disaster recovery planning may be insufficient; insurance may not cover related losses.
• Key personnel. Dependence on senior management including the President and CEO, with no key-person life insurance. Intense competition for software engineers, computer scientists, and AI/ML technical staff. Union organizing efforts, if successful, decrease operational flexibility.
• Suppliers. Limited or single sources for some inputs, and no long-term arrangements with most suppliers. Amazon specifically names reliance on "a limited group of suppliers for semiconductor products, including products related to artificial intelligence infrastructure such as graphics processing units," and warns that constraints on availability could impair its ability to develop and operate AI technologies, products, or services.
• Commercial agreements, alliances, and business relationships. Complex, resource-intensive, sometimes compensated based on a counterparty's sales volume, and may not be renewable on comparable terms.
• Acquisitions and investments. Integration difficulty, retention problems, operating losses, impairment of tangible and intangible assets and goodwill, regulatory-approval and closing risk, dependence on investees' own accounting and reporting systems where their results flow into Amazon's, and lack of control over investees whose strategic priorities may differ. Valuations "could change rapidly" and may prove impaired.
• Inventory risk from seasonality, product-cycle and pricing changes (including from tariff policy changes), defects, demand shifts, and spoilage; long lead times and prepayments on some components, which may not be returnable.
• Payments. Interchange and other fees may rise; reliance on third-party processors; payment-card association rules; and, in jurisdictions where Amazon holds customer balances or transfers money, licensing, bonding, capital maintenance, fund-segregation, and anti-money-laundering regimes.
• Rapidly evolving business model and volatile stock price, sensitive to interest rates, quarterly variations, analyst revisions, capital-structure changes including new debt or equity issuance, and peer valuations. Volatility could force higher cash compensation or larger stock grants.

Legal and regulatory

• Evolving government regulation. Amazon is "regularly subject to formal and informal reviews, investigations, and other proceedings," including open investigations alleging that aspects of its store operations, the fulfillment network and Prime, and certain aspects of AWS's cloud offering infringe competition or consumer-protection rules. It notes tax and other challenges in Italy, growing privacy and data regulation, and lawmakers' focus on regulating companies characterized as online "gatekeepers."
• Claims, litigation, and government investigations. Amazon is litigating matters alleging price fixing, monopolization, and consumer-protection violations, including cases brought by state attorneys general and the FTC. Losses may exceed amounts recorded; resolutions could require consent decrees, substantial future payments, or materially adverse changes to business practices.
• Product liability on products Amazon sells or manufactures and on third-party seller products, with A-to-z Guarantee reimbursements growing alongside third-party seller sales; insurance may prove inadequate.
• Additional tax liabilities and collection obligations, including revenue-based digital taxes on advertising and marketplace-service revenues, global minimum taxes, and tax controversies. Specifically named: the Indian tax authority's assertion that tax applies to cloud services fees paid to Amazon in the U.S.
• Government contracts, subject to procurement regulations, audits, potential debarment, periodic funding approval, and termination for convenience.

Named litigation and regulatory matters

From the FY2025 10-K, accession 0001018724-26-000004, as supplemented by the Q1 2026 10-Q, accession 0001018724-26-000014.

• Kove IO, Inc. v. Amazon Web Services (N.D. Ill., filed December 2018), alleged Amazon S3 and DynamoDB infringe three patents. In April 2024 a jury found infringement and awarded $525 million; in August 2024 the court added $148 million of pre-judgment interest. Amazon appealed in September 2024.
• Rensselaer Polytechnic Institute / CF Dynamic Advances v. Amazon.com (N.D.N.Y., filed May 2018), Alexa voice software and Alexa-enabled devices. Plaintiffs' 2023 damages report claimed $140–267 million. The district court invalidated the patent and dismissed in March 2024; in February 2026 the Federal Circuit affirmed. Subject to further appeal.
• Antitrust and consumer protection (multi-jurisdiction, since March 2020), private litigants, state attorneys general, and the FTC in the U.S., Canada, and the U.K. allege price-fixing arrangements with vendors and third-party sellers, abuse of dominance/monopolization, and consumer-protection and unjust-enrichment claims, seeking "billions of dollars of alleged damages," treble and punitive damages, injunctive and structural relief, and civil penalties. Allegations target pricing policies, Featured Offer selection, use of seller data, advertising practices, Prime's structure, and promotion of Amazon's own products. Status: in the U.S. one class action certified and three pre-certification; in the U.K. two certified, one pre-certification; in Canada class certification denied by the Federal Court of Canada with appeal pending, and two other actions pre-certification.
• Luxembourg CNPD GDPR fine (July 2021), €746 million plus practice revisions against Amazon Europe Core S.à r.l. The Luxembourg Administrative Court dismissed Amazon's appeal in March 2025; Amazon appealed again in April 2025.
• Italian Competition Authority (December 2021), €1.13 billion fine plus remedies over marketplace and logistics practices. Amazon paid the fine and seeks recovery. In September 2025 the Italian Administrative Tribunal affirmed the decision but cut the fine to €752 million; Amazon appealed in December 2025.
• Illinois Biometric Information Privacy Act class actions (since June 2019) over biometric identifiers collected via Amazon Photos, Alexa, AWS cloud services, Amazon Connect, virtual try-on, and Just Walk Out.
• Xockets, Inc. (W.D. Tex., June 2025), seven patents asserted against versions of the AWS Nitro System.
• InterDigital (from November 2025), video-technology patent complaints in the U.S., Germany, Brazil, the EU Unified Patent Court, and the U.S. ITC against Prime Video and devices carrying the Prime Video app, filed after Amazon's own August 2025 U.K. rate-setting complaint.
• Primos Storage Technology LLC (D. Del., December 2025), five patents asserted against Amazon S3, EMR, EC2 with EBS, and FSx for Lustre.
• Tax controversies, the Luxembourg tax authority denied the tax basis of certain intangible assets distributed from Luxembourg to the U.S. in 2021 (Amazon expects to remit and then recoup); the Indian tax authority asserts tax on U.S. cloud services fees, with payments that "could be significant in the aggregate." Income tax contingencies were approximately $6.6 billion at December 31, 2025 and $6.7 billion at March 31, 2026. IRS examination exposure runs from calendar year 2016 forward; other jurisdictions (Germany, India, Japan, Luxembourg, U.K.) primarily from 2011 forward.

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Management's discussion and analysis, FY2025

From the FY2025 10-K, accession 0001018724-26-000004.

Results

Consolidated net sales rose 12% to $716.9 billion in 2025 from $638.0 billion. FX added $4.4 billion; excluding FX, growth was also 12%.

• North America +10% to $426.3 billion, increased unit sales including third-party sellers, advertising, and subscriptions, driven by continued focus on price, selection, and convenience including fast shipping offers. FX reduced North America sales by $454 million.
• International +13% to $161.9 billion (+10% ex-FX), same drivers. FX added $4.9 billion.
• AWS +20% to $128.7 billion, increased customer usage, partially offset by pricing changes primarily driven by long-term customer contracts.

Operating expenses ($ millions, and as % of net sales):

Technology and infrastructure grew 23% year over year, by far the fastest-growing expense line, "primarily due to an increase in spending on infrastructure, including depreciation and amortization." Shipping costs were $95.8 billion in 2024 and $102.7 billion in 2025. Other operating expense jumped to $4.6 billion, primarily from the Q3 2025 settlement of a lawsuit with the Federal Trade Commission, plus the resolution of tax disputes tied to the Italian stores business and physical-store and other asset impairments.

Operating income $80.0 billion (from $68.6 billion), including two discrete drags: a $2.5 billion charge in Q3 2025 for the FTC settlement and $2.7 billion of estimated severance costs primarily related to planned role eliminations, of which $1.8 billion was recorded in Q3 2025.

Below the operating line:

• Interest income $4.4 billion (from $4.7 billion, on lower prevailing rates against a higher average balance); interest expense $2.3 billion (from $2.4 billion).
• Other income (expense), net swung from $(2.3) billion to +$15.2 billion, primarily from an upward adjustment for observable price changes on Amazon's nonvoting preferred stock in Anthropic, PBC, plus reclassification of gains on available-for-sale debt securities as portions of the Anthropic convertible notes converted to preferred. The 2024 loss was primarily the marked-down Rivian Automotive equity stake.
• Provision for income taxes $19.1 billion (from $9.3 billion). Equity-method investment activity, net of tax, was $(554) million in 2025 (from $(101) million), the 2025 loss primarily from impairments.
• Net income $77.7 billion (2024: $59.2 billion; 2023: $30.4 billion).

Long-term lease liabilities were $87.3 billion at year-end 2025 (2024: $78.3 billion); long-term debt $65.6 billion (2024: $52.6 billion), with $68.8 billion face value including the current portion.

Liquidity and capital

Cash, cash equivalents, and marketable securities at fair value: $123.0 billion at December 31, 2025 (from $101.2 billion), of which $29.7 billion was held in foreign currencies and $7.1 billion held by foreign subsidiaries.

• Operating cash flow $139.5 billion (from $115.9 billion).
• Investing outflow $(142.5) billion (from $(94.3) billion). Cash capital expenditures were $128.3 billion, up from $77.7 billion, primarily technology infrastructure, "the majority of which is to support AWS business growth," and fulfillment network capacity, "both of which we expect to increase in 2026." Acquisition and other investment activity was $3.8 billion net of acquired cash (2024: $7.1 billion), primarily Anthropic convertible notes including $2.7 billion invested in 2025.
• Financing inflow $9.7 billion (from $(11.8) billion outflow), on $25.0 billion of short- and long-term debt proceeds against $15.3 billion of repayments. Property and equipment acquired under finance leases: $2.9 billion (2024: $854 million).
• No borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs at year-end.

Free cash flow (Amazon's non-GAAP measure) collapsed to $11.2 billion in 2025 from $38.2 billion in 2024, operating cash flow of $139.5 billion less $128.3 billion of property and equipment purchases net of proceeds and incentives. Amazon frames free cash flow as its primary financial focus, so the compression is a direct consequence of the capex build-out.

Taxes. The One Big Beautiful Bill Act of 2025 reinstated 100% accelerated depreciation on qualified property (retroactive to January 20, 2025) and immediate expensing of domestic R&D (retroactive to January 1, 2025), which "significantly decreased our cash taxes in 2025", cash income taxes paid net of refunds fell to $8.3 billion from $12.3 billion. Amazon expected a similar effect in 2026.

Critical accounting estimates

• Inventories, every additional 1% of inventory valuation allowance at December 31, 2025 would have added roughly $405 million of cost of sales.
• Income taxes, significant judgment on provisions, deferred tax asset realization, and controversies across many jurisdictions.

Market risk

• Interest rate. $68.8 billion face value of long-term debt at year-end 2025, primarily fixed-rate unsecured senior notes carried at amortized cost.
• Foreign exchange. International was 23% of consolidated revenue in 2025. On $29.7 billion of foreign funds, adverse moves of 5%/10%/20% would produce declines of $1.5/$3.0/$5.9 billion; on intercompany balances, losses of $600 million/$1.2 billion/$2.4 billion through other income (expense), net.
• Equity investment risk. Recorded value of equity, equity warrant, and convertible debt investments in public and private companies was $69.1 billion at December 31, 2025, of which publicly traded holdings (including Rivian) were only $5.0 billion. The remainder, dominated by Anthropic, sits in Level 3 private-company valuations for which Amazon states "market sensitivities are not practicable."

Guidance given with the 10-K (as of February 5, 2026, for Q1 2026)

• Net sales $173.5–178.5 billion, growth of 11–15%, assuming a favorable ~180 bps FX impact.
• Operating income $16.5–21.5 billion, against $18.4 billion in Q1 2025, including roughly $1 billion of higher year-over-year Amazon Leo costs as the satellite business scales in 2026, plus investment in quick commerce and "even sharper prices" in the international stores business.
• Assumes no additional business acquisitions, restructurings, or legal settlements.

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Current quarter, Q1 2026 (quarter ended March 31, 2026)

From the Q1 2026 10-Q, accession 0001018724-26-000014.

Results, a re-acceleration, and a much larger balance sheet

Consolidated net sales rose 17% to $181.5 billion (Q1 2025: $155.7 billion); 15% excluding FX, which added $2.9 billion. Growth accelerated in every segment versus the prior-year quarter:

(in $ millions)

AWS growth stepped up to 28% from 17% a year earlier, increased customer usage, partially offset by pricing changes driven by long-term customer contracts. AWS reached 21% of net sales (Q1 2025: 19%).

Net sales by group (in $ millions, Q1 2025 → Q1 2026): Online stores 57,407 → 64,254; Physical stores 5,533 → 5,785; Third-party seller services 36,512 → 41,578; Advertising services 13,921 → 17,243 (+24%); Subscription services 11,715 → 13,427; AWS 29,267 → 37,587; Other 1,312 → 1,645.

Operating income by segment (in $ millions):

Cost discipline held on the retail side while infrastructure spending climbed: cost of sales fell to 48.2% of net sales (from 49.4%) and fulfillment to 15.0% (from 15.8%), while technology and infrastructure rose to 16.3% of net sales from 14.8%, growing 29% year over year on infrastructure spending including depreciation and amortization. Shipping costs were $25.7 billion (Q1 2025: $22.5 billion). Other operating expense of $447 million related primarily to charges for damaged data centers in the Middle East, plus asset impairments and intangible amortization.

Net income was $30.3 billion (Q1 2025: $17.1 billion), but the gap between that and $23.9 billion of operating income is almost entirely non-operating and non-cash: other income (expense), net of $15.6 billion (Q1 2025: $2.7 billion), comprising a $12.3 billion upward adjustment on private-company equity investments, primarily the Anthropic nonvoting preferred stock, and $4.5 billion of reclassified gains on Anthropic convertible notes converted to preferred during the quarter, partly offset by $889 million of marketable equity losses and $398 million of equity warrant losses. The income tax provision was $9.6 billion, including $4.1 billion of net discrete tax expense "primarily attributable to the net gains from our investments in Anthropic."

Interest expense rose to $800 million from $541 million; interest income was flat at $1.1 billion.

Balance sheet and cash, the financing quarter

• Cash, cash equivalents, and marketable securities $143.1 billion at March 31, 2026 (December 31, 2025: $123.0 billion); foreign-currency holdings fell to $22.1 billion from $29.7 billion.
• Operating cash flow $26.0 billion for the quarter (Q1 2025: $17.0 billion).
• Cash capital expenditures $43.2 billion for the quarter (Q1 2025: $24.3 billion), again primarily technology infrastructure for AWS and fulfillment capacity, "both of which we expect to increase in 2026."
• Investing outflow $(64.2) billion (Q1 2025: $(29.8) billion), including $15.4 billion of acquisition and other investment activity, effectively the OpenAI investment.
• Financing inflow $52.8 billion (Q1 2025: $(47) million outflow), on $59.5 billion of short- and long-term debt proceeds. Amazon states plainly: "We expect to undertake additional financing activities in 2026."
• Trailing-twelve-month free cash flow was $1.2 billion, down from $25.9 billion a year earlier, TTM operating cash flow of $148.5 billion against $147.3 billion of property and equipment purchases.
• Total stockholders' equity $441.9 billion (from $411.1 billion at year-end 2025). Property and equipment, net rose to $397.5 billion from $357.0 billion, with AWS segment property and equipment alone rising to $223.1 billion from $190.1 billion in a single quarter.

Debt. Amazon issued $37.0 billion of U.S. dollar notes and €14.5 billion ($16.8 billion) of euro-denominated notes in March 2026 for general corporate purposes, taking total unsecured senior notes outstanding to $121.8 billion (face value of long-term debt $122.6 billion, versus $68.8 billion at year-end 2025). Long-term debt on the balance sheet is $119.1 billion. Stated rates on the March 2026 dollar notes run 3.85%–6.05% with maturities from 2028 to 2076; the euro notes run 2.50%–4.85% with maturities from 2028 to 2064. The euro notes are designated as net investment hedges. Combined weighted-average remaining life of the notes: 14.2 years. Amazon is not subject to any financial covenants under the notes. Estimated fair value of the notes was $113.6 billion at March 31, 2026. No borrowings outstanding under the $20.0 billion of revolving facilities or the $30.0 billion commercial paper programs; $9.4 billion of unused letters of credit.

Total contractual commitments reached $569.3 billion at March 31, 2026 (December 31, 2025: $439.7 billion), long-term debt principal and interest $203.5 billion, operating leases $110.1 billion, leases not yet commenced $106.3 billion, unconditional purchase obligations $103.8 billion, finance leases $16.5 billion, financing obligations $10.2 billion, other $18.8 billion.

AI investments, the defining item of the quarter

• OpenAI. In Q1 2026 Amazon invested $15.0 billion in OpenAI Group PBC Series C Preferred Stock and signed an equity commitment letter to purchase an additional $35.0 billion of the same series. Amazon may elect to purchase any portion at any time and is obligated to purchase all remaining committed shares on the earlier of OpenAI meeting specified milestones or OpenAI consummating a U.S. IPO or direct listing. The obligations terminate if Amazon has not invested the $35.0 billion by December 31, 2028, a date that may accelerate. Amazon expects to fund the commitment with cash on hand. Alongside the equity, Amazon and an OpenAI affiliate entered a commercial arrangement primarily for AWS cloud services including AWS chips, and a joint collaboration agreement making certain OpenAI-model services available to Amazon and on AWS. Separately, AWS and OpenAI announced an expansion of the existing $38.0 billion multi-year commercial commitment by $100.0 billion over 8.0 years, including contractual obligations tied to the performance of AWS chips; that expansion was originally announced in the press release furnished with the Form 8-K dated February 27, 2026 (accession 0001104659-26-021050).
• Anthropic. Amazon invested $8.0 billion in Anthropic convertible notes from Q3 2023 through Q4 2025. Portions converted to nonvoting preferred stock in Q1 2025 and Q1 2026. At March 31, 2026 the nonvoting preferred stock carried at approximately $32.0 billion (December 31, 2025: $14.8 billion) and the remaining convertible notes at approximately $42.2 billion (December 31, 2025: $45.8 billion), with $36.3 billion of associated unrealized gain sitting in accumulated other comprehensive income (December 31, 2025: $39.5 billion).
• Total equity investments in private companies not accounted for under the equity method, primarily Anthropic preferred and OpenAI preferred, carried at $48.1 billion at March 31, 2026, up from $16.2 billion at year-end. Total recorded value of equity, equity warrant, and convertible debt investments in public and private companies: $96.5 billion (December 31, 2025: $69.1 billion), of which only $3.8 billion is publicly traded. These are Level 3 valuations; Amazon again states market sensitivities are "not practicable." Amazon treats both Anthropic and OpenAI as variable interests in entities it does not consolidate because it is not the primary beneficiary; maximum exposure to loss is generally limited to carrying value plus future funding commitments.

Other Q1 2026 items

• Remaining performance obligations, primarily AWS, were approximately $364 billion at March 31, 2026 for contracts with original terms exceeding one year, with a weighted-average remaining life of 5.5 years. Total unearned revenue at December 31, 2025 was $25.0 billion, of which $9.4 billion was recognized in Q1 2026.
• Energy contracts. Approximately 200 million megawatt-hours subject to derivative fair-value measurement, with a weighted-average remaining duration of roughly 15 years and the majority of megawatt-hours to be delivered beyond nine years. Some contracts extend 20 years. Fair-value swings will run through operating expenses and Amazon warns they "may be material" given duration and valuation volatility, though the Q1 2026 impact was not significant.
• Stock. No repurchases in Q1 2025 or Q1 2026; $6.1 billion remains under the March 2022 $10.0 billion authorization. Stock-based compensation was $4.0 billion in the quarter (Q1 2025: $3.7 billion), with $14.4 billion of unrecognized cost remaining and a weighted-average recognition period of one year. Common shares plus shares underlying outstanding stock awards fell to 10.9 billion from 11.0 billion.
• Tax. On February 18, 2026 the IRS issued Notice 2026-7 on the U.S. treatment of previously capitalized domestic R&D costs, applied retroactively to 2025; Amazon expects it to significantly decrease 2024 and 2025 cash taxes paid. Cash income taxes paid in the quarter were $1.3 billion.
• Amazon expects macroeconomic factors, inflation, interest rates, resource and supply volatility, geopolitical developments including "unpredictable shifts in global tariff and trade policies," and AI adoption, to continue affecting results into Q2 2026, and expects to keep making additional AI investments. Forward-looking risk language in this filing specifically calls out "resource and supply volatility, including for memory chips."

Guidance for Q2 2026 (as of April 29, 2026)

• Net sales $194.0–199.0 billion, growth of 16–19% versus Q2 2025, assuming an unfavorable ~10 bps FX impact.
• Operating income $20.0–24.0 billion, against $19.2 billion in Q2 2025.
• Assumes Prime Day occurs in Q2 2026, and that no additional business acquisitions, restructurings, or legal settlements are concluded.

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Subsequent events

From the Q1 2026 10-Q, accession 0001018724-26-000014, covering events after the March 31, 2026 quarter end.

Globalstar, Inc. acquisition, merger agreement entered April 13, 2026, announced April 14, 2026 (announcement per the joint press release furnished with the Form 8-K dated April 14, 2026, accession 0001104659-26-042880). Amazon entered a definitive merger agreement to acquire Globalstar, Inc., a Delaware corporation, for a mix of cash and stock. Globalstar stockholders will elect, per share, either $90.00 in cash or 0.3210 shares of Amazon common stock (value capped at $90.00 per share). Total consideration will vary with Amazon's share price and stockholder elections, and is subject to (i) a proration mechanism capping aggregate cash elections at a maximum of 40% of total Globalstar shares, with excess cash consideration automatically converted to stock pro rata, and (ii) a downward adjustment of up to $110 million if Globalstar fails to meet certain operational milestones. As of the merger agreement date, the acquisition implied a value for Globalstar of approximately $10.9 billion, including its debt. On the date of the merger agreement Amazon also entered agreements with Apple Inc., Globalstar's largest customer, to provide certain services after the acquisition and to redeem certain equity interests held by Apple in a Globalstar special purpose entity. The deal is expected to close in 2027, subject to closing conditions including regulatory approvals and Globalstar's achievement of certain satellite replacement milestones.

Additional Anthropic investment and financing facility. Subsequent to March 31, 2026, Amazon invested a further $5.0 billion in Anthropic nonvoting preferred stock. It also amended its commercial arrangement with Anthropic, primarily for AWS cloud services, including contractual obligations tied to the performance of AWS chips. Amazon further entered a financing arrangement making available to Anthropic an aggregate facility not to exceed $20.0 billion, expiring 30 months after a liquidity event such as an Anthropic IPO or direct listing. No amount was available to draw at inception; amounts become available as Amazon reaches certain compute-capacity delivery milestones under the amended commercial arrangement, and Anthropic may then draw at its discretion. Draws take the form of new Anthropic convertible notes or, after a liquidity event, Anthropic common stock issued to Amazon in exchange for cash. Amazon also holds an option to invest up to $5.0 billion in Anthropic's future equity financings, which if exercised would reduce the amount available under the facility by the amount exercised.

Litigation. In February 2026 the U.S. Court of Appeals for the Federal Circuit affirmed the district court's judgment invalidating the patent in the Rensselaer Polytechnic Institute / CF Dynamic Advances matter over Alexa voice software and devices. The decision remains subject to appeal.

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What a long-term investor should carry away

Three things dominate this reporting period and are worth holding side by side.

First, the operating business accelerated. Q1 2026 consolidated growth of 17% (15% ex-FX) against FY2025's 12% is a genuine re-acceleration, and it is led by AWS at 28% versus 17% a year earlier, with advertising up 24%. Retail cost lines improved as a percentage of sales in the quarter. Segment operating income rose in all three segments.

Second, the capital intensity is extraordinary and rising. Cash capex went from $77.7 billion (2024) to $128.3 billion (2025) to $43.2 billion in Q1 2026 alone, with management guiding higher again in 2026. Free cash flow, Amazon's own stated primary financial focus, has gone from $38.2 billion (2024) to $11.2 billion (2025) to $1.2 billion on a trailing-twelve-month basis at March 31, 2026. Financing has shifted accordingly: unsecured senior notes outstanding went from $68.0 billion to $121.8 billion in one quarter (total long-term debt face value $68.8 billion to $122.6 billion), and management states it expects further financing in 2026. Total contractual commitments now stand at $569.3 billion.

Third, a large and growing share of reported earnings is a mark on private, Level 3 AI stakes. Of Q1 2026's $30.3 billion of net income, $15.6 billion came through other income (expense), net, almost entirely from Anthropic revaluations. The recorded value of equity, warrant, and convertible debt investments is now $96.5 billion, of which only $3.8 billion is publicly traded. Amazon states market sensitivities on the private holdings are "not practicable" to estimate, and $36.3 billion of unrealized gain on the Anthropic notes still sits in accumulated other comprehensive income. Those marks can move in both directions, and they are separate from the underlying commerce and cloud economics.

Layered on top: committed AI-related outlays of $35.0 billion still to fund at OpenAI, an up-to-$20.0 billion facility plus a $5.0 billion option at Anthropic, an announced $10.9 billion Globalstar acquisition closing in 2027, and a satellite business (Amazon Leo) whose costs are largely expensed rather than capitalized until commercial viability, with roughly $1 billion of incremental year-over-year cost flagged for 2026.