Amazon reports first-quarter earnings Wednesday with more signs than ever that its cloud business is in demand, including a $244 billion revenue backlog, blockbuster deals with Meta, OpenAI and Anthropic, and a custom chip business that doubled in a matter of months.
The problem: a $200 billion capital spending plan, largely dedicated to new AI infrastructure, that drained Amazon’s free cash flow and sank its stock 10% last quarter.
Here’s a preview of the key numbers and storylines to watch.
Core expectations: Wall Street expects Amazon to report about $177 billion in first-quarter revenue, up roughly 14% from a year ago, with earnings of $1.65 per share. That’s up just 4%, reflecting the growing depreciation costs from the company’s infrastructure buildout.
Amazon’s guidance for first-quarter operating income ranges from $16.5 billion to $21.5 billion — a $5 billion spread that reflects uncertainty around tariff impacts on its retail business and about $1 billion in new costs from its satellite internet project, Amazon Leo.
AWS growth: But the main event is Amazon Web Services, where analysts expect about $36.8 billion in revenue, up nearly 26% from a year ago. AWS growth has been accelerating for three straight quarters (from 17% to 20% to 24%) and investors are looking for that to continue.
On the fourth-quarter earnings call, CEO Andy Jassy described the AI market as a “barbell” — with AI research labs spending heavily on one end, and enterprises automating routine tasks on the other. The massive opportunity, he said, is in the middle: core enterprise production workloads that haven’t moved to AI yet, for the most part.
“The lion’s share of that demand is still yet to come,” Jassy said.
The question is whether that middle is starting to fill in, or whether AWS growth is still being driven primarily by a handful of giant AI lab deals.
Beyond the cloud: It’s easy to forget in the AI frenzy, but Amazon is also the country’s largest online retailer, and the first quarter brings its own set of pressures. Jassy warned earlier this year that import costs from tariffs were starting to show up in product prices, and the company faces growing competition from Walmart, Temu, and Shein for cost-conscious shoppers.
Online store sales grew 10% to $83 billion in the holiday quarter, and third-party seller services brought in $52.8 billion. But costs are rising too: Amazon spent $31.5 billion on shipping in Q4, up 10% from a year earlier.
At the same time, the company has been cutting costs aggressively, eliminating about 16,000 corporate jobs in January in what Jassy has described as a campaign against bureaucracy, followed by additional cuts in its robotics unit in March.
Advertising remains a standout, growing 23% to $21.3 billion in the fourth quarter and emerging alongside AWS as one of Amazon’s primary profit engines.
Amazon won’t be the only tech giant reporting Wednesday. Microsoft, Alphabet, and Meta are all scheduled to release quarterly results the same day, giving investors a chance to compare notes on AI spending and cloud growth across the industry.
Google Cloud has been growing faster than AWS in percentage terms, adding another dimension to the debate over which company is best positioned to capitalize on the AI boom.
Check back Wednesday afternoon for coverage.
