Amazon ( AMZN ) reported first-quarter earnings that topped Wall Street estimates on the top and bottom lines, sending the retail giant’s shares up about 2% in premarket trading on Wednesday.
Driven by a strong showing from its cloud computing segment, Amazon continued a wave of Big Tech results that have mostly impressed Wall Street, even as investors turn their focus to the conclusion of the Fed’s May policy meeting on Wednesday.
Net sales rose 13% from the same period last year to $143.3 billion, Amazon reported late Tuesday, topping analysts’ expectations of $142.6 billion, according to Bloomberg data. The beat was driven by a 16% jump in Amazon Web Services (AWS) revenue, which Amazon said is on track to generate $100 billion annually.
The company reported an adjusted earnings per stock at $0.98 versus the consensus estimate of $0.83.
Like its rivals Microsoft and Alphabet, Amazon is using its clout in its cloud computing business to gain an edge in the nascent AI market. AI tools require massive amounts of data and processing power to train and run large language models and their applications that rely on cloud providers to provide vital infrastructure.
Amazon CFO Brian Olsavsky said on a call with reporters after the report that total capital spending is expected to rise “meaningfully” this year from nearly $50 billion in 2023, driven by higher infrastructure costs to support growth in AWS.
Amazon is seeing strong demand on the AWS side, with customers signing up for longer agreements with larger commitments, many with generative AI components, he said.
Advertising was another strong contributor to revenue growth in Q1. The company matched analysts’ expectations of $11.8 billion, up 24% from the same period last year.
Although Amazon dazzled with growth across its businesses, its outlook showed some signs of a potential slowdown in consumer spending.
“What we’re seeing is a bit of a continuation of what we’ve said in previous quarters. Customers in the U.S. are very thoughtful about their spending. They’re looking for deals. They’re shopping down,” Olsavsky said. “And that trend looks set to continue into Q2.”
Amazon expected second-quarter net sales to be between $144 billion and $149 billion, slightly below analysts’ estimates of $150.2 billion, according to Bloomberg data.
Amazon’s report arrived a week after its cloud and AI competitor Microsoft ( MSFT ) had an impressive quarter that beat expectations on the strength of its cloud computing business. The market cheered even louder on the results of Google parent Alphabet ( GOOG , GOOGL ), which outperformed on the top and bottom lines and announced a new dividend, the latest in a trend among tech giants.
Amazon, which has positioned itself as an AI leader, is another player in the race to claim market share and launch new consumer services. In March, Amazon increased its investment in AI startup Anthropic, paying an additional $2.75 billion to bring its total investment to $4 billion.
Amazon’s stock, which joined the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year.
Hamza Shaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
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