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Amazon earnings updates: Q1 crushes estimates as AI spend and AWS remain in focus for Wall Street [Business Insider]

Amazon earnings updates: Q1 crushes estimates as AI spend and AWS remain in focus for Wall Street

Amazon just dropped its Q1 2025 earnings, and the numbers are a lot better than anyone expected. The e-commerce and cloud computing giant reported earnings per share of $1.29 on revenue of $154.7 billion, easily beating Wall Street’s consensus estimates of $1.07 EPS on $150.5 billion in revenue. For a company that’s often seen as a bellwether for consumer spending and enterprise tech, this is a strong signal that the economy is still humming along—at least for now.

Investors have been holding their breath all week, waiting for Amazon to show that its massive investments in artificial intelligence and its cloud division, AWS, are actually paying off. After the numbers hit the wires Thursday afternoon, Amazon stock jumped roughly 4% in after-hours trading. That’s a relief for shareholders who’ve been nervous about slowing growth in the core retail business and the sky-high capital expenditure commitments.

Why this quarter matters more than most

This isn’t just another beat. Amazon’s Q1 is usually a quieter period following the holiday rush, but this year, the company had to contend with a few wild cards. Consumer confidence has been shaky thanks to lingering inflation and higher interest rates. Meanwhile, the AI arms race has forced Amazon to spend billions on data centers and specialized chips. The big question was whether that spending would start to show up in the revenue line, or if it would just eat into profits.

The answer, apparently, is that it’s starting to work. AWS revenue grew 17% year-over-year to $28.4 billion, which is slightly above the 16% growth analysts had penciled in. That’s a welcome acceleration from the single-digit growth AWS saw in much of 2023. Amazon CEO Andy Jassy has been telling investors that AI workloads would eventually drive cloud adoption, and this quarter’s numbers suggest that narrative is gaining traction.

“We’re seeing companies of all sizes modernize their infrastructure and move to the cloud, and generative AI is a big part of that conversation,” Jassy said on the earnings call. He specifically pointed to Amazon Bedrock, the company’s managed service for building generative AI applications, as a key growth driver. Bedrock now has “tens of thousands” of customers, up significantly from a year ago.

What the AI spend actually looks like

Let’s talk about the elephant in the room: capital expenditures. Amazon’s capex hit $18.5 billion in Q1, up from $15.7 billion in the same period last year. That’s a massive number, and it’s mostly going toward AI infrastructure—think data centers, custom chips like Trainium and Inferentia, and networking gear. Wall Street has been divided on whether this spending spree is wise or reckless.

For now, the market seems to be giving Amazon the benefit of the doubt. The company’s operating income came in at $15.3 billion, well above the $12.6 billion analysts expected. That shows Amazon is still generating plenty of cash flow even as it invests heavily. The advertising business also helped. Amazon’s ad revenue grew 24% to $13.2 billion, making it the third-largest digital ad platform behind Google and Meta. Those high-margin ad dollars are cushioning the impact of the AI investments.

But there’s a catch. Amazon warned that capex will continue to climb in the second quarter and for the rest of the year. CFO Brian Olsavsky said the company expects “meaningfully higher” spending in 2025 compared to 2024. That’s not exactly music to the ears of investors who are worried about diminishing returns. If the AI boom turns out to be overhyped, Amazon could be left with a lot of expensive, underutilized infrastructure.

AWS is still the crown jewel

No matter how you slice it, AWS remains the most important part of the Amazon story. The cloud division contributed roughly 40% of Amazon’s total operating income in Q1, even though it only accounts for about 18% of revenue. That’s the power of high-margin enterprise services. AWS margins ticked up to 38% from 37% a year ago, a sign that the business is becoming more efficient at scale.

Competition isn’t going away, though. Microsoft Azure grew 31% in its most recent quarter, and Google Cloud is also gaining ground. Amazon still leads the cloud market with about 32% share, but the gap is narrowing. The good news for Amazon is that the overall cloud pie is growing fast, thanks largely to AI. Gartner estimates that worldwide cloud spending will hit $720 billion in 2025, up 20% from last year. Even if Amazon loses a little share, it can still post strong absolute growth.

Retail and delivery hold steady

While the headlines are all about AI and cloud, Amazon’s retail business is still the backbone. North America segment sales rose 12% to $95.6 billion, while international sales grew 10% to $33.5 billion. Those are solid numbers, especially considering that Amazon has been compressing delivery times to one-day or same-day for Prime members. Faster delivery is expensive, but it also drives customer loyalty and repeat purchases.

The company also reported that its same-day delivery network expanded to more than 120 metropolitan areas. That’s up from about 90 a year ago. For context, Amazon now fulfills more than 4 billion items with same-day or next-day delivery in the U.S. alone. That’s a logistical feat that competitors like Walmart and Target are still struggling to match.

One area of concern is the continued slowdown in third-party seller services. Revenue from seller fees grew just 11% in Q1, the slowest pace in several quarters. That could be a sign that independent merchants are feeling the pinch from higher costs or that competition from Temu and Shein is eating into their sales. Either way, it’s something to watch.

What Wall Street is watching next

For the second quarter, Amazon guided revenue between $158 billion and $163 billion, which is roughly in line with analyst expectations. The real focus in the coming months will be on two things: AWS acceleration and the trajectory of AI-related revenue. If Amazon can show that its AI investments are translating into sustainable growth, the stock could have more room to run.

There’s also the question of margins. Amazon has made a ton of progress in cutting costs since 2022, when it embarked on the largest layoff in its history. But with capex rising and wage pressures persisting, operating margins could start to compress again. The Q1 numbers suggest Amazon is managing that balancing act well for now, but the second half of the year will be the real test.

Bottom line: Amazon’s Q1 was a clear win. The company is firing on all cylinders—cloud is accelerating, ads are booming, and retail is steady. The AI bet is still early, but it’s starting to pay off. Investors who were worried about the spending should feel a little more comfortable tonight. But they should also keep one eye on that capex number. Big bets can pay big dividends, but they can also go wrong.

For now, Amazon is proving that it can walk and chew gum at the same time. That’s more than a lot of companies can say in this environment.


Ahmed Abed – News journalist

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