Amazon (AMZN) reported first-quarter earnings that beat Wall Street expectations for both revenue and bottom line, sending the retail giant's stock up about 2% in premarket trading on Wednesday.
Amazon, powered by strong results in its cloud computing sector, is largely on the brink of a wave of Big Tech results that surprised Wall Street, even as investors' attention turns to the conclusion of the May Fed policy meeting on Wednesday. continues.
Amazon late Tuesday reported net sales of $143.3 billion, up 13% from a year earlier, beating analysts' estimates of $142.6 billion based on Bloomberg data. The jump was fueled by a 16% increase in Amazon Web Services (AWS) revenue, he said, with Amazon on track to generate $100 billion annually.
The company reported adjusted earnings per share of $0.98, compared to consensus estimates of $0.83.
Like its rivals Microsoft and Alphabet, Amazon has become a dominant force in the cloud computing business, giving it an edge in the nascent AI market. AI tools require large amounts of data and processing power to train and run large language models and their applications, and rely on cloud providers to supply critical infrastructure.
In a call with reporters after the news, Amazon's Chief Financial Officer Brian Olsavsky said that overall capital spending will drop to $50 billion in 2023 due to increased infrastructure costs to support AWS's growth. It said it was expected to increase “significantly” this year from the near future.
He said Amazon is seeing strong demand on the AWS side, with customers signing up for long-term contracts with greater commitments, many using generative AI components.
Advertising also contributed significantly to revenue growth in the first quarter. The company matched analyst estimates of $11.8 billion, an increase of 24% year-over-year.
Despite Amazon's impressive overall business growth, its outlook showed some signs of a potential setback in consumer spending.
“What we're seeing is a bit of a continuation of what we've been saying in previous quarters. U.S. customers are being very cautious about their spending. They're looking for deals. Deals are on the downside.” said Olsabsky. “And that trend looks set to continue in the second quarter.”
Amazon expects second-quarter net sales to be between $144 billion and $149 billion, slightly lower than the $150.2 billion expected by analysts, according to Bloomberg data.
Amazon's report comes a week after cloud rival and AI competitor Microsoft (MSFT) had a stellar quarter, beating expectations on strong cloud computing business. The market cheered even louder at Google's parent company Alphabet's (GOOG, GOOGL) earnings results. The results, which included higher sales and bottom line profits and also announced a new dividend, are the latest trend among the tech giants.
Amazon, which has established itself as a leader in AI, is another player in the race to gain market share and launch new consumer services. In March, Amazon increased its investment in AI startup Anthropic with an additional $2.75 billion, bringing its total investment to $4 billion.
Amazon's stock price, which joined the Dow Jones Industrial Average (DJI) in February, has risen about 20% over the year.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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