Amazon shares pop after earnings beat

Amazon (AMZN) reported first-quarter earnings that beat Wall Street estimates on the top and bottom lines, sending shares of the retail giant up as much as 5% in after-hours trading.

Buoyed by a strong showing from its cloud computing sector, Amazon continued a wave of Big Tech results that mostly dazzled Wall Street even as investors turned their focus to the conclusion of the Federal Reserve's May policy meeting on Wednesday.

Net sales rose 13% compared to the same period last year to reach $143.3 billion, exceeding analysts' expectations of $142.6 billion, according to Bloomberg data. The win was driven by a 16% jump in Amazon Web Services (AWS) revenue, which Amazon said is on track to hit $100 billion annually.

The company reported adjusted EPS of $0.98 versus consensus estimates of $0.83.

Like rivals Microsoft and Alphabet, Amazon is throwing its weight into its cloud computing business to gain an advantage in the emerging artificial intelligence market. AI tools require massive amounts of data and processing power to train and run large language models and their applications, and rely on cloud providers to provide critical infrastructure.

Total capital expenditures are expected to rise “significantly” this year from about $50 billion in 2023, driven by higher infrastructure costs to support growth at AWS, Amazon CFO Brian Olsavsky said on a call with reporters following the report.

Amazon is seeing strong demand on the AWS side, as customers sign up for longer deals with larger commitments, many with generative AI components, he said.

Advertising was another strong contributor to Q1 revenue growth. The company matched analysts' expectations of $11.8 billion, up 24% from the same period last year.

Even as Amazon impressed with growth across its business, its forecasts showed some signs of a potential decline in consumer spending.

“What we're seeing is part of the continuation of what we've said in previous quarters. Customers in the U.S. are thinking carefully about their spending. They're looking for deals. They're trading on discounts,” Olsavsky said. “This trend appears to continue in the second quarter.”

Amazon expected second-quarter net sales to range between $144 billion and $149 billion, slightly lower than analysts' estimates of $150.2 billion, according to Bloomberg data.

Amazon's report arrived a week after cloud and AI rival Microsoft (MSFT) reported an impressive quarterly quarter, beating expectations for the strength of its cloud computing business. The market cheered even louder at the results of Alphabet (GOOG, GOOGL), Google's parent company, which outperformed top and bottom and came with a new earnings announcement, the latest in a trend among the tech giants.

The story continues

Amazon, which has positioned itself as a leader in artificial intelligence, is another player in the race to gain market share and launch new consumer services. In March, Amazon increased its investment in artificial intelligence startup Anthropic, pumping another $2.75 billion, bringing its total investment to $4 billion.

Amazon stock, which joined the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year.

Hamza Shaaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.

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