AMZN Q1 Earnings Call: Cloud, Retail, and AI Initiatives Highlight Mixed Segment Results

Cloud computing and online retail behemoth Amazon (NASDAQ:AMZN) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 8.6% year on year to $155.7 billion. The company expects next quarter’s revenue to be around $161.5 billion, close to analysts’ estimates. Its non-GAAP profit of $1.59 per share was 16.2% above analysts’ consensus estimates.

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StockStory’s Take

Amazon’s first quarter results reflected broad-based revenue growth across its retail and cloud computing businesses, with management attributing outperformance in operating profit to improvements in fulfillment efficiency and cost discipline. CEO Andy Jassy highlighted the company’s ongoing investment in delivery speed, expansion of product selection, and efforts to keep prices low as key factors behind customer engagement, noting the successful rollout of regionalized fulfillment and faster delivery records for Prime members. On the cloud side, Amazon Web Services (AWS) continued to grow, benefiting from demand for both traditional cloud migration and new AI-driven workloads.

Looking ahead, Amazon’s management expects continued growth in both retail and AWS, but flagged persistent uncertainty from potential new tariffs and macroeconomic volatility. The company is prioritizing supply chain flexibility, inventory planning, and investments in AI infrastructure. Jassy noted, "We are focused on keeping prices low and providing the broadest selection," while CFO Brian Olsavsky cautioned that elevated stock-based compensation and further investments in satellite and AI infrastructure would impact near-term operating margins.

Key Insights from Management’s Remarks

Amazon’s management pointed to a mix of operational improvements and evolving customer behavior as the primary forces behind Q1 performance, while also addressing the challenges and opportunities of a shifting trade and technology environment.

• Fulfillment Network Redesign: Management implemented a new regionalized inbound architecture for its fulfillment network, which led to faster delivery speeds and lower delivery costs by placing more inventory closer to customers. This initiative helped set new delivery records for Prime members in the quarter.
• Customer Engagement and Promotions: Amazon held global promotional events, including the Big Spring Sale and Ramadan/Eid Sale, which collectively saved customers over $500 million. Everyday essentials, such as grocery and household items, grew more than twice as fast as the rest of the business, reflecting consumer focus on value and core needs.
• Ad Business Expansion: The advertising segment posted 19% year-over-year growth, with management citing strong adoption of its "full funnel" offerings. These tools enable brands to target customers across Amazon’s media properties, such as Prime Video and Twitch, and on third-party sites, highlighting Amazon’s growing role as an ad platform.
• AWS AI Initiatives: AWS saw continued growth from both cloud migration and AI workloads. The introduction of custom AI chips (Trainium 2), new generative AI models, and the Amazon Bedrock platform was designed to offer lower-cost, scalable AI solutions for enterprise customers. Management stated that its AI business is already at a multibillion-dollar annual run rate and growing at triple-digit percentages.
• Tariff and Trade Uncertainty: Management addressed the potential impact of new tariffs, explaining that Amazon’s broad selection and diversified supplier base could help mitigate price increases. Forward buying and inventory adjustments were made to manage potential risks, but management emphasized that future effects depend on how tariffs develop.

Drivers of Future Performance

Management’s outlook centers on maintaining operational flexibility, investing in technology infrastructure, and navigating external risks such as tariffs and macroeconomic shifts to support ongoing growth.

• AI and Cloud Capacity Expansion: Amazon is increasing investment in AWS infrastructure, including AI hardware and custom silicon, to address rapidly rising demand for generative AI and traditional cloud services. Management expects the easing of supply chain constraints to enable greater revenue capture in coming quarters.
• Retail Pricing and Inventory Management: The company plans to continue its focus on low prices and efficient inventory placement, using data-driven approaches to mitigate the impact of potential tariffs and maintain customer loyalty.
• Ad Platform Growth: Management identified further opportunity in expanding Amazon’s advertising platform, with ongoing development of measurement tools and integration across media properties expected to support profitability and sustained top-line growth.

Top Analyst Questions

• Ross Sandler (Barclays): Asked about AWS’s ability to capture AI-related revenue given current capacity constraints; management explained that AI demand is outpacing supply but expects supply chain improvements and more hardware deployments to ease constraints later in the year.
• Eric Sheridan (Goldman Sachs): Inquired about Amazon’s strategic priorities amid tariff uncertainty; CEO Andy Jassy highlighted broad selection, low prices, and supplier diversity as key mitigants.
• Justin Post (Bank of America): Questioned AWS revenue lumpiness versus competitors; Jassy attributed this to unpredictable enterprise migration cycles and evolving AI use cases, noting that growth rates reflect AWS’s larger revenue base.
• Doug Anmuth (J.P. Morgan): Sought insight on AWS’s margin drivers; CFO Brian Olsavsky pointed to operational efficiencies, custom silicon, and infrastructure investment, but noted future margins will fluctuate with ongoing investment.
• Brent Thill (Jefferies): Asked about AWS backlog and enterprise migration trends; management reported a $189 billion backlog and described renewed enterprise focus on migrating core workloads to the cloud alongside early-stage AI adoption.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace and scale of AWS’s AI and cloud infrastructure rollouts, (2) evidence of margin stability in the retail segment as the company navigates tariffs and macroeconomic headwinds, and (3) sustained adoption of Amazon’s advertising and AI-driven products. The development of Project Kuiper and expansion of Alexa+ will also serve as important indicators of Amazon’s ability to execute on long-term growth initiatives.

Amazon currently trades at a forward price-to-earnings ratio of 29.2×. In the wake of earnings, is it a buy or sell? Find out in our free research report.

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