Amazon.com delivered first-quarter results that topped Wall Street expectations, with revenue and profit both exceeding forecasts. The company's cloud segment posted its strongest growth rate in more than three years, fueled by demand for artificial intelligence services, which helped offset the impact of sharply higher spending.
Seattle-based Amazon reported net sales of $181.5 billion for the quarter ended March 31, a 17% increase from a year earlier, surpassing the $177.23 billion consensus estimate. Amazon Web Services generated $37.6 billion in revenue, up 28% and ahead of the $36.68 billion analysts had projected. The cloud unit's growth rate was the highest in 15 quarters, driven by AI workloads.
The company faces pressure to demonstrate that its massive investments in AI are translating into sales rather than merely piling on costs for servers, semiconductors, and electricity. AWS growth is a key metric for investors tracking the returns on Amazon's capital expenditure plan, which is expected to reach $200 billion this year.
Operating income rose to $23.9 billion from $18.4 billion a year ago. Net income reached $30.3 billion, or $2.78 per share, but that figure includes a $16.8 billion pre-tax gain from Amazon's investment in Anthropic. Analysts had been expecting earnings of $1.62 per share and operating income of about $20.75 billion.
Chief Executive Andy Jassy highlighted AWS's 28% growth, noting it is occurring on a very large base. He also said Amazon's chip division has surpassed a $20 billion annualized revenue run rate, and advertising revenue exceeded $70 billion over the trailing 12 months. The company's stores unit posted 15% growth in units sold.
Free cash flow for the trailing 12 months came in at $1.2 billion, a sharp drop from $25.9 billion a year ago. The decline was largely attributed to a $59.3 billion year-over-year increase in property and equipment purchases, with AI investments accounting for most of the surge.
Amazon set its second-quarter revenue outlook between $194 billion and $199 billion, signaling growth of 16% to 19%, above the $189.15 billion Wall Street had anticipated. Operating income for the quarter is expected to be between $20 billion and $24 billion, up from $19.2 billion a year earlier. The guidance includes the impact of Prime Day, which falls in the second quarter.
Competition among major cloud providers remains intense. Microsoft's Azure and Google Cloud had been forecast to outpace AWS in cloud growth, while Meta's capital outlays are tied to its AI-powered ad business. All four companies are facing scrutiny from investors tracking combined AI infrastructure spending that is set to top $600 billion this year.
Despite the strong AWS performance, risks remain. The company flagged energy costs, geopolitics, tariffs, chip availability, and shifts in customer demand as variables that could impact future outcomes. Options markets were anticipating a swing of nearly 7% in Amazon shares for the week, underscoring the extent to which Big Tech earnings are carrying the AI narrative.
Analysts were largely optimistic ahead of the results, with 20 issuing buy ratings and two neutral. Investors are seeking clarity on the appetite for additional AWS capacity, the pace of scaling Amazon's Trainium chips, and whether the $200 billion spending plan can sustain growth without further eroding free cash flow.
