Amazon’s AI Investments Drive 28% Growth in AWS Revenue

Amazon Web Services (AWS) experienced a significant growth of 28% in the first quarter, marking its fastest pace in nearly four years. This growth exceeded Wall Street’s expectations and validated Amazon’s $200 billion capital spending plan.

The overall sales for Amazon reached $181.5 billion, a 17% increase, with operating income rising to $23.9 billion, a 30% increase. These figures surpassed guidance and outperformed Wall Street’s revenue expectations of around $177 billion.

The company reported profits of $30.3 billion, translating to $2.78 per diluted share. However, this included a $16.8 billion pre-tax gain on Amazon’s investment in Anthropic, which inflated the bottom-line numbers. Excluding this one-time gain, adjusted earnings per share stood at $1.61, slightly below analyst forecasts of $1.62.

Amazon’s advertising business also saw growth, reaching $17.2 billion in the quarter, with total advertising revenue surpassing $70 billion over the past 12 months.

In the core e-commerce sector, unit sales increased by 15%. Amazon CEO Andy Jassy highlighted this as the strongest growth rate since the end of the COVID-19 lockdowns, attributing it in part to faster delivery services, with over 1 billion items shipped same-day or overnight in the U.S. this year.

Jassy stated, “Amazon is in the middle of some of the biggest inflections of our lifetime.”

Over the past year, Amazon invested $147.3 billion in property and equipment, almost doubling from the previous year’s $88 billion, leaving only $1.2 billion in free cash flow.

Despite record profits, Amazon is reinvesting the majority of its earnings into expanding capacity, particularly in AWS and AI infrastructure. The company plans to spend approximately $200 billion in capital expenditures for the full year.

Shares experienced a 2% decline in initial after-hours trading.

Update: During the earnings call, Amazon revealed that its AWS revenue backlog surged to $364 billion, up from $244 billion in the previous quarter. This backlog excludes a recent deal with Anthropic valued at over $100 billion. Jassy emphasized the breadth of the backlog beyond just a few customers.

Jassy also disclosed that Amazon has secured over $225 billion in revenue commitments specifically for Trainium, its custom AI chip. He described Amazon’s custom silicon business as one of the top three data center chip businesses globally, with the chips segment growing by nearly 40% from the prior quarter.

For the second quarter, Amazon anticipates revenue between $194 billion and $199 billion, with operating income ranging from $20 billion to $24 billion. The guidance assumes Prime Day will occur in Q2 in most countries, a departure from Q3 last year.