Amazon Web Services delivered revenue of $29.3 billion, up 17% from a year ago. Parent Amazon reported better-than-expected first quarter results.
Amazon reported first quarter earnings of $17.1 billion, or $1.59 a share, on revenue of $155.7 billion, up 9% from a year ago.
Wall Street was expecting Amazon to report earnings of $1.36 a share on revenue of $155.04 billion. AWS was expected to have revenue of $29.42 billion.
Going into Amazon's results the main concerns about the company were tariffs, a volatile economy and AWS growth rates.
As for the outlook, Amazon noted that its outlook is unpredictable due to "foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies, and customer demand and spending (including the impact of recessionary fears), inflation, interest rates, regional labor market constraints, (and) world events."
- AWS rolls out Nova Premier on Amazon Bedrock
- AWS, Amazon court developers to take Nova models for a spin, Alexa+ goes early access
- Amazon's Alexa gets a brain transplant, showcases Amazon Bedrock, Nova
With those caveats, Amazon projected second quarter revenue of $159 billion to $164 billion, up 7% to 11% from a year ago. Operating income is expected to be between $13 billion to $17.5 billion.
By the numbers:
- AWS continued to lead the earnings charge. In the first quarter, AWS delivered operating income of $11.5 billion on revenue of $29.3 billion.
- AWS ended the quarter with $189 billion backlog.
- North American Amazon operating income was $5.8 billion in the first quarter on revenue of $92.9 billion, up 9% from a year ago.
- International operating income was $1 billion on revenue of $33.5 billion, up 8% from a year ago.
CEO Andy Jassy said Amazon was off to a good start and talked up the new Alexa+ rollout. On the AWS front, Jassy said Trainium2 and Bedrock had good traction. The mission remains "to find meaningful ways to make customers’ lives easier and better every day.”
Holger Mueller, an analyst at Constellation Research, said:
"Amazon had a good quarter, growing around the globe, and becoming more profitable year over year. Demand for its products and services remain strong, And key profit contributor AWS grew as well delivering almost to 2/3 of Amazon profit. It was a key quarter with new Amazon Nova, new Alexa+ and even a quantum chip – Amazon is doing well across the board – now the question is how will the economic uncertainty affect the consumer and thus Amazon."
Here are the key items covered by Jassy on the conference call:
- "As always, we're working to keep prices low. And with this being an uncertain moment for consumers, it's even more important than it typically is," said Jassy, who noted that Amazon will hold sales events including Prime Day in July.
- "Looking ahead, we'll continue to refine our newly redesigned inbound network, build out our same day delivery sites and add additional robotics and automation throughout our buildings. You'll also see us expand the number of delivery stations that we have in rural areas of the U.S. So, we can get items to people who live in less densely populated areas much more quickly," said Jassy.
- Tariffs. Jassy said tariffs haven't affected pricing or demand yet, but buying ahead has been a key tactic. "We've seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact. We also have not seen the average selling price of retail items appreciably go up yet," said Jassy. "Some of this reflects some forward buying we did in our first-party selling and some of that reflects some advanced inbounding our third-party sellers have done, but a fair amount of this is that most sellers just haven't changed pricing yet. Again, this could change depending on where tariffs settle."
- Trainium 2. "Trainium 2 is starting to lay in capacity in larger quantities with significant appeal and demand. While we offer customers the ability to do AI in multiple chip providers and will for as long as I can proceed, customers doing AI at any significant scale realize that it can get expensive quickly," said Jassy. "So, the 30% to 40% better price performance that Trainium 2 offers versus other GPU based instances is compelling. For AI to be as successful as we believe it can be, the price of inference needs to come down significantly."
- AI huge, but modernization runway is also huge. "Our AI business has a multibillion dollar annual revenue run rate, continues to grow triple-digit year-over-year percentages, and is still in its very early days. While there is good reason for the high optimism about AI, there's still so much on-premises infrastructure yet to be moved to the cloud," said Jassy. "Infrastructure modernization is much less actually to talk about the AI. The fundamental to any company's technology and invention capabilities to develop their productivity is speed and cost structure. If a company is to realize the full potential of AI, they are going to need their infrastructure and data in the cloud."
- Nvidia. "We've been bringing on a lot of P5s, which is a form of NVIDIA chip instances, as well as landing more and more Trainium 2 instances as fast as we can. And I would tell you that our AI business right now is a multi-billion dollar annual run rate business that's growing triple-digit percentages year-over-year. And we, as fast as we actually put the capacity in, it's being consumed," said Jassy. "We have a lot more Trainium 2 instances, and the next generation of Nvidia's instances landing in the coming months. I expect that there are other parts of the supply chain that are a little bit jammed up as well at motherboards and some other componentry. I do believe that the supply chain issues and the capacity issues will continue to get better as the year proceeds."
