Key Takeaways
- Amazon delivered Q1 earnings of $2.78 per share versus analyst expectations of $1.63, with total revenue reaching $181.5 billion
- AWS posted its strongest growth rate in 15 quarters, climbing 28% year-over-year to $37.6 billion in revenue
- Capital expenditures jumped to $44.2 billion during the quarter, nearly doubling from $25 billion in the prior-year period, squeezing free cash flow to $1.2 billion
- Second-quarter operating income guidance centered at $22 billion, falling short of the Street’s $22.7 billion projection
- Shares of AMZN dropped approximately 1.4% Thursday following the earnings release, despite the impressive topline results
Amazon delivered an impressive first-quarter performance, yet shares couldn’t sustain early momentum. AMZN declined about 1.4% Thursday morning after a brief surge during Wednesday’s extended trading session.
The headline figures were undeniably strong. The e-commerce and cloud giant reported adjusted earnings of $2.78 per share alongside revenue of $181.5 billion. Analyst consensus had pointed to $1.63 per share on $177.3 billion in sales.
The cloud computing division stole the spotlight. AWS generated $37.6 billion in revenue, marking a 28% increase from the same quarter last year and surpassing expectations of $36.9 billion. CEO Andy Jassy highlighted this as AWS’s most robust expansion in 15 quarters.
Yet Thursday’s market response painted a contrasting picture.
Investor anxiety centered primarily on infrastructure investment. Amazon poured $44.2 billion into property and equipment during the first quarter, a dramatic increase from the $25 billion deployed in the comparable 2024 period. This aggressive spending severely constrained free cash flow, which plummeted to a mere $1.2 billion over the trailing twelve months — representing a 95% decline year-over-year.
The company maintained its $200 billion full-year capex projection, which BofA analyst Justin Post highlighted as encouraging. He elevated his price target from $298 to $310 while reaffirming a Buy recommendation.
Accounting Adjustments Cloud the Picture
A substantial portion of Amazon’s reported net income of $30.3 billion stemmed from a $16.8 billion pre-tax unrealized gain related to its Anthropic equity stake. Excluding this non-operational item, adjusted EPS comes in around $1.56 — marginally below the Zacks consensus of $1.60.
These accounting-driven earnings beats typically trigger wariness among institutional money managers. When headline figures appear exceptional but operational fundamentals present a more nuanced reality, profit-taking often follows.
Second-quarter projections also underwhelmed. Amazon forecast revenue between $194 billion and $199 billion, exceeding Wall Street’s $189 billion estimate. However, operating income guidance spanning $20 billion to $24 billion placed the midpoint at $22 billion — modestly beneath the consensus forecast of $22.7 billion.
Artificial Intelligence Infrastructure Takes Center Stage
The AI buildout narrative continues to dominate. On April 20, Amazon disclosed that Anthropic pledged over $100 billion in AWS spending across the coming decade, including commitments for up to 5 gigawatts of Amazon’s proprietary Trainium processors.
Jassy noted that Amazon has accumulated more than $225 billion in revenue commitments specifically for its Trainium chip technology.
The company also broadened its OpenAI collaboration this week, integrating OpenAI’s models and Codex agent into AWS. This development followed Microsoft and OpenAI’s announcement terminating their exclusive cloud partnership.
Cantor Fitzgerald analyst Deepak Mathivanan observed that “the AWS acceleration enabled by AI revenues is still in early stages,” noting there was “a lot to like” in the quarterly performance.
AMZN shares have climbed roughly 12% year-to-date, significantly outperforming the S&P 500’s 4.7% advance during the identical timeframe.
Amazon achieved a record operating margin of 13.1% in the first quarter.
