Amazon stock dips even as earnings beat expectations with strong cloud growth

Amazon on Wednesday posted better-than-expected earnings and revenue for the first quarter, and reported cloud sales that topped analysts' expectations.

The stock fell more than 3% in extended trading.

Here's how the company did, compared with estimates from analysts polled by LSEG:

Wall Street was also looking at other key revenue numbers:

Revenue in Amazon's cloud segment increased 28% year over year to $37.59 billion, marking its fastest growth in more than three years. Wall Street had expected AWS sales to grow 26%.

Amazon and other big tech companies have been trying to justify their hefty artificial intelligence spending, which could approach $700 billion in 2026. Amazon in February projected its capital expenditures will reach $200 billion in 2026, a sharp increase from last year.

The company recently announced a host of AI-related deals with OpenAI, Anthropic and Meta, which could help ease investor concerns about when its spending will deliver returns, but also suggest Amazon will need to build out even more data centers and infrastructure to meet surging demand.

Amazon CEO Andy Jassy has also looked to highlight the company's homegrown chips business as a beneficiary of the AI boom, and it called out the segment near the top of its earnings release.

"We're in the middle of some of the biggest inflections of our lifetime, we're well positioned to lead, and I'm very optimistic about what's ahead for our customers and Amazon," Jassy said in a statement.

Amazon said capital spending in the first quarter reached $44.2 billion, which was above Wall Street's projected $43.6 billion, according to FactSet. Meanwhile, its free cash flow for the past twelve months fell to $1.2 billion, a 95% decrease year over year, primarily because of its AI investments, the company said.

For the current quarter, Amazon said it expects sales to come in between $194 billion and $199 billion. Analysts polled by LSEG were expecting $188.9 billion.

The company gave a wide range for operating income in the second quarter, projecting it to be between $20 billion and $24 billion. Analysts were projecting $22.65 billion, according to StreetAccount.

Revenue in its online stores segment, which still accounts for the largest share of Amazon's total sales, grew 12% in the first quarter to $64.3 billion, higher than analysts' estimated $62.7 billion.

Alongside its earnings release, the company announced this year's Prime Day deals bonanza will be held in June, a month earlier than its typical timeframe.

Amazon's headcount fell by 1,000 employees since the fourth quarter. It finished the first quarter with 1.57 million employees globally, which was roughly flat from last year.

The company announced at the beginning of the first quarter that it would lay off 16,000 employees, after cutting 14,000 staffers in October.

This is breaking news. Please check back for updates.

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