The “Magnificent Seven” stock in this rally thesis is Amazon.com, Inc. (NASDAQ: AMZN). Amazon’s second-quarter 2026 results show rapid AWS growth and expanding AI and chip businesses, but also a large free-cash-flow outflow tied primarily to higher investment in property and equipment. Those results make a rally plausible, not due: the available figures do not establish that Amazon shares are undervalued today or predict where the price will go.
Why Amazon is the stock in question
The title refers to Amazon, one of the large technology companies commonly grouped as the “Magnificent Seven.” In an October 5, 2026 opinion article, Motley Fool contributor David Jagielski, CPA, argued that Amazon could be overdue for a rally, pointing to valuation relative to the company’s history and growth in AWS, AI and chips. “Overdue” is an investment view, not a measurable schedule for a stock-price move. The article’s historical valuation comparison is not enough to establish Amazon’s current valuation.
Amazon’s July 30, 2026 results provide useful evidence about the business behind the thesis. They do not provide a current share price or valuation multiple, so they cannot answer whether AMZN is cheap at a particular price.
What Amazon reported in Q2 2026
For the quarter ended June 30, 2026, Amazon reported net sales of $200.6 billion, up 20% year over year. AWS sales were $42.2 billion, up 37%, and the segment reported $16.6 billion in operating income. These figures come from Amazon’s second-quarter results release, dated July 30, 2026.
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CEO Andy Jassy said AWS grew 36.7% year over year, its fastest growth in 18 quarters, and that Amazon’s AI and chips businesses each exceeded annual revenue run rates of $25 billion. The company also reported triple-digit year-over-year growth for each business. Amazon’s release describes run rates, which annualize a current pace; they are not audited full-year revenue or a guarantee that the pace will continue.
How to read the rally case
AWS growth supports the business case
AWS’s 37% sales growth and $16.6 billion of operating income show both expansion and substantial segment profitability in the reported quarter. Continued cloud and AI demand could support Amazon’s results if the company can convert demand into sustained sales and earnings. One quarter, however, cannot establish how long that growth will last or how much investors have already priced in.
Rank #2
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- Alexa is happy to help – Ask Alexa for weather updates and to set hands-free timers, get answers to your questions and even hear jokes. Need a few extra minutes in the morning? Just tap your Echo Dot to snooze your alarm.
- Keep your home comfortable – Control compatible smart home devices with your voice and routines triggered by built-in motion or indoor temperature sensors. Create routines to automatically turn on lights when you walk into a room, or start a fan if the inside temperature goes above your comfort zone.
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AI and chips add potential, alongside execution risk
The reported AI and chip run rates indicate businesses Amazon says have reached meaningful scale. They do not disclose, by themselves, the profit those businesses generate or the return Amazon will earn on the infrastructure and development required to grow them. Revenue momentum is relevant, but investors still need to assess margins, investment needs and returns.
Net income was heavily affected by investment gains
Amazon reported Q2 net income of $62.6 billion, including $53.4 billion in non-operating pre-tax other income, primarily from investments in Anthropic. That investment-related income should not be treated as ordinary operating profit or assumed to recur each quarter. For a view of the operating business, sales and segment operating income are more informative than reading the headline net-income figure in isolation.
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Heavy investment is pressuring cash flow
Trailing-twelve-month free cash flow was a $7.6 billion outflow. Amazon attributed the result primarily to a year-over-year increase of $66.1 billion in net purchases of property and equipment, primarily reflecting AI investment. Infrastructure spending can build capacity for future growth, but it also raises the question of whether the resulting earnings and cash generation will justify the capital committed. The reported outflow is a concrete counterweight to the growth case, not proof that the investments will fail.
What would make the stock attractive at today’s price?
Business growth and an attractive stock price are separate questions. A company can grow quickly while its shares are already priced for even faster growth; conversely, a weaker period can be reflected in a lower valuation. To evaluate Amazon as an investment, compare a dated share price and valuation measure with expectations for operating earnings and cash flow rather than relying on the word “cheap” or on the company’s past multiple alone.
Rank #4
- Your favorite music and content – Play music, audiobooks, and podcasts from Amazon Music, Apple Music, Spotify and others or via Bluetooth throughout your home.
- Alexa is happy to help – Ask Alexa for weather updates and to set hands-free timers, get answers to your questions and even hear jokes. Need a few extra minutes in the morning? Just tap your Echo Dot to snooze your alarm.
- Keep your home comfortable – Control compatible smart home devices with your voice and routines triggered by built-in motion or indoor temperature sensors. Create routines to automatically turn on lights when you walk into a room, or start a fan if the inside temperature goes above your comfort zone.
- Do more with device pairing – Fill your home with music using compatible Echo devices in different rooms, or create a home theatre system with Fire TV.
- Say goodbye to drop-offs and buffering - With eero Built-in, Echo Dot doubles as a mesh wifi extender, adding up to 1,000 sq. ft. of wifi coverage to your existing eero network.
- Check operating performance: Track AWS growth and operating income, along with sales and profitability across Amazon’s other businesses.
- Separate recurring results from investment gains: Do not project the Anthropic-related non-operating income as if it were routine operating earnings.
- Watch cash generation against spending: Assess whether free cash flow improves as major AI and infrastructure investments are made, and whether those investments produce returns.
- Test the valuation assumptions: Use a current, dated price and a clearly stated valuation basis, then consider what growth and profitability that price requires.
- Account for uncertainty: A thesis dependent on continued cloud and AI expansion can disappoint if demand, margins or investment returns fall short of expectations.
Should you buy Amazon stock right now?
The Q2 results make Amazon’s operating growth a credible reason for investors to investigate the stock, especially AWS’s growth and profitability. They do not establish that shares are currently undervalued or that a rally is imminent. The same results show a substantial trailing-twelve-month free-cash-flow outflow and a net-income figure boosted by non-operating investment income.
Whether AMZN fits your portfolio depends on the price you would pay, your expectations for future cash generation, your tolerance for uncertainty, and how much exposure you want to one company. Without a verified current market price and valuation measure, the evidence supports evaluating the thesis—not a definitive buy call.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
