Key Points:
- Amazon Web Services revenue jumped 28% to reach $37.6 billion during the first quarter of the year.
- The technology giant spent $44.20 billion on capital projects to support growing demand for artificial intelligence.
- Amazon stock dipped 3.7% after rival Google reported a massive 63% increase in sales in its cloud division.
- Advertising sales grew 24% to hit $17.2 billion as the company placed more commercials on Prime Video.
Amazon delivered strong cloud computing sales that easily beat Wall Street estimates on Wednesday. Companies around the world continue to pour massive amounts of money into artificial intelligence projects. This heavy enterprise spending helped Amazon Web Services generate record financial numbers. Despite the strong sales report, investors remained nervous about the future and sent Amazon stock down about 3.7% in extended trading.
The core cloud computing division, known as Amazon Web Services, saw its revenue jump 28% to hit $37.6 billion in the first quarter. This performance easily surpassed the expectations of financial analysts, who originally predicted a 25.1% increase to $36.6 billion. Across the entire company, overall net sales grew to a massive $181.5 billion. Investors closely watch the cloud division because it generates the vast majority of the company’s profit.
The stock drop happened for two main reasons. First, Amazon executives projected their current-quarter operating income will land somewhere between $20 billion and $24 billion. This wide range fell slightly below the exact target investors wanted to see. Second, fierce rival Alphabet reported incredible growth in its own cloud division. Google Cloud sales skyrocketed 63% to reach $20 billion during the first quarter. This massive growth outpaced Amazon’s, sending Alphabet shares up 6% after the market closed. Analysts noted that Google’s faster growth rate left some Amazon shareholders slightly disappointed.
Amazon is spending historic amounts of cash to build new infrastructure. For the period ending March 31, the company reported capital expenditures of $44.20 billion. This number represents a massive 76% increase compared to the same period last year. It also came in higher than the $41.40 billion expected by analysts. Earlier this year, Amazon shocked the stock market when it announced plans to spend roughly $200 billion on capital projects throughout the entire year.
The broader technology industry is burning through cash right now. Experts expect large technology companies to pour roughly $600 billion into artificial intelligence projects this year alone. This unprecedented spending spree puts heavy pressure on corporate cash flows and tests the patience of nervous investors. Technology leaders argue they must buy more computer chips and build new data centers right now because customer demand currently outstrips available supply. Amazon Chief Executive Officer Andy Jassy wrote a letter to shareholders this month addressing these concerns. He promised that the heavy spending in 2026 would generate major profits in 2027 and 2028.
To attract more customers, Amazon recently formed deep partnerships with the two largest artificial intelligence startups in the world. On Tuesday, Amazon announced it would make all the latest models from OpenAI available directly on its cloud platform. This includes the popular coding agent called Codex. Amazon took advantage of a recent market shift that loosened the exclusive ties between OpenAI and its rival cloud provider, Microsoft. Amazon also made a major move by acquiring another startup last week. The company struck a deal to invest up to $25 billion in Anthropic, the creator of the popular Claude artificial intelligence system. In exchange for the massive investment, Anthropic committed to spending more than $100 billion on Amazon Web Services (AWS) over the next 10 years.
These strategic partnership moves are already generating real money. Earlier this month, Amazon revealed that its new artificial intelligence services were already producing more than $15 billion in annualized revenue. This strong performance helped push Amazon stock up about 14% since the start of the year. The steady climb keeps the company firmly positioned among the most valuable technology giants in the global market.
Looking ahead, Amazon expects another strong financial period. The company predicts that revenue for the current quarter will range from $194 billion to $199 billion. This forecast comfortably beats the average analyst estimate of $188.9 billion. The company offered this strong outlook even after accounting for some negative financial impacts from unfavorable foreign exchange rates.
Beyond the cloud, the traditional retail business continues to evolve. Amazon invests heavily in expanding its same-day delivery services to reach more towns and small cities across the country. The retail giant also sharpens its focus on fresh grocery delivery. Executives want to compete directly with dominant supermarket chains like Walmart and Kroger to win more weekly food shoppers.
Advertising remains a massive bright spot for the company. Ad sales jumped 24% year-over-year to reach $17.2 billion in the first quarter. Amazon actively finds new places to show commercials to its everyday customers. The company recently started putting advertisements inside virtual grocery shopping carts and displaying them during movies and shows on the Prime Video streaming platform.
To manage all these expanding projects, Amazon carefully controls its overall employee count. The company eliminated roughly 16,000 corporate jobs in January across several departments. Despite these high-profile cuts, the global workforce dropped by only about 1,000 people compared to the end of last year. The company continues to hire workers for its warehouses and delivery networks while trimming management roles.
