Amazon Q1 Earnings: Solid Results Overshadowed by AWS Miss and Tepid Guidance, Shares Slide 5%

Amazon entered its first-quarter earnings report riding a wave of strong performance expectations following blockbuster results from peers microsoft and meta. However, while the e-commerce and cloud giant delivered respectable beats on revenue and earnings per share, investor reaction was tepid. Shares of amazon dropped more than 5% in after-hours trading to around $181—testing the 10- and 20-day moving averages—as a slight miss on AWS growth and conservative guidance weighed on sentiment.

Revenue for the quarter rose 9% year-over-year to $155.7 billion, modestly ahead of the $155.16 billion consensus forecast. Earnings per share came in at $1.59, surpassing the $1.36 consensus. Operating income surged 20% from the prior year to $18.4 billion, slightly above the high end of the $14-18 bln guidance, reflecting strength across key segments and continued efficiency improvements in e-commerce logistics and AWS operations.

Amazon Web Services (AWS), a cornerstone of Amazon’s long-term investment thesis, reported revenue growth of 17% to $29.3 billion. While solid on the surface, the number slightly missed the 18%+ whisper expectations set by recent strong results from Microsoft Azure and Google Cloud. AWS operating income jumped to $11.5 billion from $9.4 billion a year ago, maintaining robust profitability. Nonetheless, investors appeared disappointed by the fractional miss, prompting Gene Munster to tweet that the market may be overreacting to a "whisper miss" given the underlying momentum.

Ask Aime: What's behind Amazon's 5% share drop after earnings?

North America segment revenue rose 8% year-over-year to $92.9 billion, while international sales grew 5% to $33.5 billion. Excluding currency headwinds, international growth would have been 8%. Advertising remained a bright spot, with revenue coming in at $13.92 billion versus Street estimates of $13.74 billion.

CEO Andy Jassy struck an upbeat tone in the company press release, emphasizing Amazon’s innovation engine and operational improvements. "From Alexa+ to Trainium2 chips to Project Kuiper’s first successful satellite launches, we’re making meaningful progress in improving customer experiences", Jassy said. His comments were aimed at reinforcing the long-term vision as Amazon ramps investments across AI infrastructure, satellite internet, and next-gen logistics.

Despite the operational momentum, guidance was a source of investor hesitation. For Q2, Amazon expects revenue between $159 billion and $164 billion, largely in line with the consensus of $160.9 billion. However, operating income guidance of $13.0 billion to $17.5 billion trailed slightly below the $17.8 billion Street forecast at the high end. While not overly bearish, the lack of upside in the forward outlook disappointed those hoping for more aggressive growth guidance in the wake of AI tailwinds.

On the cash flow front, Amazon reported trailing 12-month operating cash flow of $113.9 billion, up from $99.1 billion a year ago. However, free cash flow declined to $25.9 billion from $50.1 billion, a reversal that could raise questions about the near-term capital efficiency of Amazon’s investment plans.

Amazon’s capex story remains central to the long-term investment narrative. The company reiterated its aggressive infrastructure roadmap, with 2025 capital expenditures expected to reach $105 billion—up sharply from $83 billion in 2024. Most of the spend is targeted toward AWS growth and AI capabilities. While this could pressure near-term AWS margins, analysts broadly view the spending spree as a necessary moat-building effort that will reinforce Amazon’s cloud dominance over time.

The company also announced plans for its 11th annual Prime Day in July, hinting at another catalyst for retail engagement. Innovations like the Alexa+ voice assistant, enhancements to Prime delivery speed, and new generative AI chips like Trainium2 are all part of Amazon’s strategy to differentiate across both consumer and enterprise ecosystems. It also announced its first quantum chip, Acelot, which it will develop.

Looking at technicals, the stock’s post-earnings drop brought it to the $181 area, which marks a confluence of the 10- and 20-day moving averages. While the decline reflects initial disappointment, this level has previously served as support. Should commentary on the earnings call help ease concerns around AWS growth, tariffs, or margin pressures, the stock could find footing and rebound in the coming sessions.

In conclusion, Amazon’s Q1 earnings reflected solid financial execution and continued momentum in high-margin businesses like AWS and advertising. However, a fractional AWS miss, guidance that lacked upside, and broader macro uncertainty—including potential tariff pressures—tempered investor enthusiasm. While the company remains well-positioned strategically, the near-term tone will be shaped by what executives reveal on the call about growth trends, investment priorities, and their outlook on navigating global trade disruptions. Investors hoping for a breakout may need to exercise patience as Amazon works through a noisy—but opportunity-rich—2025 macro environment.