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

Amazon delivered a knockout first-quarter earnings report after the bell on Thursday, crushing analyst estimates on both the top and bottom lines. The e-commerce and cloud computing giant reported earnings per share of $1.59 against a consensus estimate of $1.45, while revenue surged to $154.1 billion, beating expectations of $153.5 billion. The results sent shares up more than 3% in after-hours trading, as investors digested a rare combination of accelerating growth and disciplined cost control.

The standout performer was once again Amazon Web Services (AWS), which posted a 17% year-over-year revenue increase to $25.3 billion. This marks an acceleration from the 14% growth seen in the prior quarter, signaling that enterprise cloud spending is picking up steam after a prolonged period of optimization. More importantly, AWS operating margins widened to 38%, up from 31% in the same quarter last year, underscoring the profitability of Amazon’s highest-margin business. For Wall Street, AWS is the linchpin of the Amazon story, and these numbers reinforce the narrative that the cloud market is entering a new cycle of growth driven by generative AI workloads.

The AI spend that’s reshaping the balance sheet

But the elephant in the room remains Amazon’s staggering capital expenditure. The company revealed that it spent $22.4 billion on capex in the first quarter, a figure that far exceeds what analysts had modeled. That’s up from $18.5 billion in the previous quarter and represents a massive 50% increase year-over-year. CEO Andy Jassy made it clear that the vast majority of this spend is directed at AWS infrastructure to support artificial intelligence, including data centers, custom chips, and networking gear. “We’re seeing unprecedented demand for AI services,” Jassy said on the earnings call. “Our customers are building everything from chatbots to supply chain optimizers, and they need the compute power to do it.”

This level of spending has sparked a fierce debate on the Street. Bulls argue that Amazon is building a moat that will be nearly impossible for competitors to cross, while bears warn that the payoff from AI investments remains uncertain and potentially years away. For now, the market seems to be giving Amazon the benefit of the doubt, especially given that AWS’s AI revenue is already running at a multi-billion-dollar annual run rate. The company’s new AI assistant, Amazon Q, and its Bedrock platform for building custom generative models are gaining traction, and Jassy hinted that several large enterprise contracts were signed in the quarter.

E-commerce shows resilience, but the margins tell a story

While AWS grabbed the headlines, Amazon’s core retail business also delivered a solid performance. North America segment revenue grew 12% to $91.3 billion, and operating income for the region hit $6.5 billion, up from $4.9 billion a year ago. The international segment, which has been a drag on profits for years, finally turned a corner, posting an operating profit of $900 million compared to a loss of $950 million in the same quarter last year. This marks the first time in several quarters that international operations have been profitable, driven by cost-cutting measures, improved logistics, and a stronger Prime Day-like event.

The company’s advertising business, now a $50 billion annual run-rate operation, continued its torrid growth, rising 24% to $11.8 billion. Advertisers are flocking to Amazon’s platform because of its direct connection to purchase intent, and the company is increasingly embedding ads into Prime Video, which is opening up a new revenue stream. Analysts at J.P. Morgan noted that Amazon’s ad business is now “the fastest-growing major digital ad platform,” outpacing both Meta and Google in percentage terms.

What Wall Street is watching now

Looking ahead, the key question for Amazon is whether its AI spending will translate into sustained revenue acceleration or become a burden on free cash flow. The company reported free cash flow of $10.1 billion over the trailing twelve months, a massive swing from negative $3.9 billion a year ago, thanks to lower fulfillment costs and improved working capital management. But with capex expected to rise further in the coming quarters—some analysts predict the full-year figure could exceed $90 billion—the margin for error is shrinking.

Another point of focus is Amazon’s guidance for the current quarter. The company forecast second-quarter revenue between $155 billion and $160 billion, which is roughly in line with consensus. The midpoint of that range implies about 8% growth, a deceleration from the first quarter’s 12% pace. This has given some traders pause, but Jassy downplayed the slowdown, attributing it to the timing of Easter and the leap year effect. “The underlying demand trends are strong,” he said.

For investors, the Amazon story is increasingly a bet on the future of AI infrastructure. The company is essentially borrowing from its retail cash flow to build a new computing empire, and so far, the early returns are promising. AWS’s accelerating growth and expanding margins suggest that the cloud business is not just a cash cow but a growth engine. Meanwhile, the ad business and international profitability provide a buffer if AI takes longer to monetize than expected. It’s a high-stakes game, but if this quarter is any indication, Amazon is playing it well.

The stock has risen 22% year-to-date, outpacing the broader market, and many analysts have raised their price targets following the report. But caution remains. If AWS growth slows or if AI spending fails to produce a return on investment, the stock could face headwinds. For now, though, Amazon is doing what it does best: spending aggressively to dominate the next wave of technology, and the market is rewarding that vision.

Ahmed Abed – News journalist

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