Amazon.com Inc. (AMZN) shares climbed in early trading Thursday after the company's cloud computing division, Amazon Web Services, delivered its strongest quarterly revenue growth in nearly four years. The performance helped ease investor concerns about the company's heavy spending on artificial intelligence infrastructure.
AWS reported a 28% year-over-year increase in revenue, reaching $37.6 billion for the first quarter. This marks the fastest growth rate for the cloud unit in 15 quarters, according to CEO Andy Jassy. The acceleration signals that enterprise demand for AI workloads is beginning to translate into meaningful revenue for the tech giant.
Overall, Amazon posted first-quarter net sales of $181.5 billion, up 17% from the same period last year. Net income came in at $30.3 billion, boosted by $16.8 billion in pre-tax gains related to the company's investment in Anthropic, the creator of Claude AI models. Operating income rose to $23.9 billion, compared to $18.4 billion a year earlier.
For the current quarter, Amazon forecast net sales in the range of $194 billion to $199 billion, representing growth of 16% to 19%. The outlook includes the expected impact of Prime Day, which the company said will occur during the second quarter. Operating income is projected between $20 billion and $24 billion.
The strong AWS performance drew attention from analysts. Jesse Cohen, senior analyst at Investing.com, called the reacceleration in AWS sales growth the standout story, noting that customers are bringing new AI workloads to the platform. However, the competitive landscape remains intense. Google Cloud, a unit of Alphabet Inc. (GOOGL), reported a 63% revenue jump to $20 billion, outpacing AWS's growth rate, though from a smaller base.
Amazon continues to invest aggressively in AI. The company has committed to a $200 billion capital spending plan for 2026, focusing on data centers, custom chips, and AI products. On April 28, OpenAI announced plans to bring its Codex coding agent and managed agents to AWS, available through Amazon's Bedrock platform. Meanwhile, Amazon has agreed to invest up to $25 billion in Anthropic, which in turn is expected to spend more than $100 billion over a decade on Amazon's cloud services.
Retail and advertising also contributed to the quarter's results. North America sales rose 12% to $104.1 billion, while international sales climbed 19% to $39.8 billion. Advertising services generated $17.24 billion, a 24% increase, driven by sponsored ads, video, and display advertising.
Despite the revenue growth, cash flow remains a concern. Amazon's free cash flow for the trailing 12 months dropped sharply to $1.2 billion, down from $25.9 billion a year earlier. First-quarter capital expenditures reached $44.2 billion, exceeding analyst expectations. The heavy spending on AI infrastructure has weighed on free cash flow, even as the company races to build capacity ahead of demand.
The key question for investors is whether AWS can sustain its growth momentum as Amazon continues to invest in capacity before it is fully utilized. Rapid cloud gains provide some breathing room for Jassy, but the ultimate test will be the cash generation of these AI factories once they are operational.
