Amazon Q1 results beat estimates as cloud demand rides AI wave higher

Investing.com — Amazon posted first-quarter results that topped Wall Street estimates as better-than-expected performance in its cloud business underscored renewed cloud demand from the artificial intelligence boom.     

Amazon (NASDAQ:AMZN) rose 2% in premarket trading Wednesday following the report.

Amazon reported Q2 EPS of $0.98 on revenue of $143.31 billion, beating estimates of $0.84 on revenue of $142.65B. 

Amazon Web Services, its cloud revenue segment, grew 17% to $25B, topping consensus estimates of $14.7% growth, with the division’s annual revenue run rate now at a $100B.

“The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate,” the company said Tuesday.

North America segment sales increased 12% year-over-year to $86.3B.

Looking ahead, the company guided Q2 revenue slightly below than analyst expectations.

For the second quarter, the company expects revenue of $144B to $149B, compared with Wall Street estimates of $150.2B. Operating income for Q2 was guided in a range of $10B to $14B.

Commenting on the report, Goldman Sachs analysts said stronger-than-expected results were driven by “noticeable strength in North America Operating Margins, solidly positive International Operating Margins, mid 20%s Advertising revenue growth and a mixture of upside in both AWS (cloud computing) revenue and segment Operating Margins.”

Analysts believe that there will likely be a continued emphasis on two key areas post-earnings, including the health of the global consumer –especially considering reported weaknesses in Europe – and questions about how Amazon’s management plans to balance growth investments with margin progression in the upcoming years.

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Stifel analysts voiced similar remarks, saying that despite “an uneventful quarter,” Amazon’s Q1 print showed that the company “made progress on the margin story, AWS is largely past digestion phase, and advertising continues to ramp.”

The investment banking firm reiterated a Buy rating and upped its price target from $224 to $228. 

Similarly, JMP Securities also reaffirmed a Buy rating on the stock, with its analysts continuing to view AMZN “as one of our top picks” after the report.

(Yasin Ebrahim contributed reporting)