Key Points:
- Amazon will share its first-quarter earnings this Wednesday alongside massive tech rivals like Google and Microsoft.
- The company plans to spend $200 billion on artificial intelligence infrastructure this year alone.
- High gas prices pose a major problem for the shipping industry, potentially costing companies billions.
- Analysts expect Amazon to report $177.2 billion in total revenue and strong growth in its cloud computing division.
Amazon prepares to release its first-quarter earnings this Wednesday. The online retail giant will share its financial results right alongside other technology heavyweights like Google, Meta, and Microsoft. Investors will watch this report very closely. They want clear proof that Amazon is making smart choices with its massive budget for artificial intelligence tools.
The top technology companies plan to spend an unbelievable $650 billion on artificial intelligence infrastructure in 2026. Amazon alone will spend $200 billion of that total. Despite this massive price tag, Wall Street loves what the company is doing. Amazon’s stock has jumped 13% since the year started. This performance beats Google, which grew 12%, and easily outpaces Microsoft, which actually fell 12% so far this year.
While the technology side looks great, Amazon faces real trouble in the physical world. High fuel prices make shipping packages much more expensive. These rising delivery costs threaten to erode profits from the massive e-commerce division this quarter. Transporting goods across the country costs more money every time gas prices tick higher.
Brian Nowak, an analyst at Morgan Stanley, mapped out the potential damage. He warned that a worst-case scenario with fuel costs could create a massive $4 billion problem for Amazon, even after the company charges sellers extra fuel fees. His basic model expects the company to lose $600 million to fuel costs in the first quarter and another $2 billion in the second quarter. He assumes Amazon will find clever ways to offset these losses later in the year.
Financial experts shared their firm predictions for the upcoming earnings report. They expect Amazon to earn $1.62 per share on a total revenue of $177.2 billion. This shows solid growth from the same time last year. Back then, Amazon reported $1.59 per share and $155.6 billion in total revenue.
Analysts break down that massive revenue into specific working parts. They expect the core e-commerce business to bring in $62.65 billion. The advertising division should generate another $16.89 billion, which marks a strong 21% jump from last year. Meanwhile, Amazon Web Services, the famous cloud computing division, should hit $36.79 billion in revenue. This represents a huge 25% increase from the previous year.
Wall Street analysts also keep a close eye on remaining performance obligations. These are legal contracts that the company signed with customers who have not yet paid for the services. At the end of last year, Amazon reported a massive $244 billion in these remaining obligations. This large number tells investors exactly how much demand there is for the Amazon cloud platform right now.
Chief Executive Officer Andy Jassy recently shared exciting details in his annual letter to shareholders. He revealed that artificial intelligence services inside the cloud division currently generate an annual revenue run rate of over $15 billion. Jassy noted that this number continues to grow rapidly. He admitted the business could grow even faster, but the company simply lacks the physical space to house more computers. Amazon added 3.9 gigawatts of power capacity in 2025 and plans to completely double that amount by 2027 to meet endless client demand.
Building custom computer chips plays a major role in Amazon’s future. Jassy said the company is actively exploring selling its processors directly to other businesses. Right now, Amazon only rents out its chip power through its popular cloud services. Selling chips directly to tech startups could unlock a massive new cash pile.
The chief executive explained the basic math behind the custom chips. The chip business already boasts a $20 billion annual revenue run rate. That specific division grows by triple digits every single year. Jassy claims this $20 billion figure actually looks too small because the company only makes money through the cloud. If Amazon spun the chip division out into a completely separate business today, he estimates it would generate roughly $50 billion a year.
Amazon recently proved the value of its chips by signing major deals with powerful partners. Last week, the company agreed to provide its custom Graviton processors to Meta. Meta will use these chips to power its own artificial intelligence services. Amazon also expanded a massive deal with Anthropic. Under this new agreement, Amazon will supply the startup with raw computing power using its custom Trainium chips.
To seal the deal with Anthropic, Amazon agreed to open its wallet. The technology giant will invest an initial $5 billion into the promising artificial intelligence startup. Amazon also secured the legal option to invest an additional $20 billion into Anthropic at a later date. This bold move guarantees Amazon will hold a massive stake in the future of the technology industry.
