Amazon's AI Capex Strain: Free Cash Flow Turns Negative, Debt Doubles

Amazon's free cash flow went negative by $7.6B in Q2 2026 despite a 33% rise in operating cash flow, driven by massive AI capex. Long-term debt doubled to $128.9B. The $69B Anthropic gain is non-recurring. This signals that the cloud giant's infrastructure spending is not self-funding, raising debt to fuel the AI arms race. Investors need to watch cash flow, not just earnings, as a key risk to the AWS growth narrative. However, today's Anthropic S-1 filing reveals Amazon's $33B investment now worth ~$190B (6x paper gain), providing a massive paper offset to the debt, though the gain is unrealized and governance risks remain.