AMZN Falls After Hours: Earnings Crush Expectations, CapEx Fears Don’t

• The company has signaled it remains on track for approximately $200 billion in capital expenditures for the full year, much of it directed toward AI infrastructure. 
• CEO Andy Jassy, however, struck an optimistic tone regarding the company’s position in the AI boom and said it is “in the middle of some of the biggest inflections of our lifetime.”
• Amazon’s Q1 earnings, as well as its Q2 guidance, beat Wall Street expectations.

Shares of Amazon.com Inc (AMZN) fell roughly 1.6% in after-hours trading on Wednesday, despite the company posting first-quarter results that comfortably exceeded Wall Street expectations, as investors appeared to focus instead on the company’s continued heavy capital spending on artificial intelligence and cloud infrastructure.

The company reported total net sales of $81.52 billion, compared to an analyst estimate of $177.17 billion, while earnings per diluted share came in at $2.78, above an estimated $1.64, thanks to growth in the firm’s Amazon Web Services segment.

Breaking down the business, North America revenue rose 12% to $104.1 billion, while international sales increased 19% to $39.8 billion. Amazon Web Services (AWS) delivered particularly strong results, with revenue climbing 28% to $37.6 billion — its fastest growth rate in 15 quarters — fueled by surging demand for AI-related services and infrastructure and agreements with OpenAI, Anthropic, Meta, NVIDIA, Uber, U.S. Bank, Fox Corporation, among many others.

Overall operating income increased to $23.9 billion from $18.4 billion a year ago. Net income reached $30.3 billion, partly helped by $16.8 billion in pre-tax investment gains related to Anthropic.

On a trailing twelve-month basis, operating cash flow rose 30% to $148.5 billion, but free cash flow dropped sharply to just $1.2 billion due to a $59.3 billion year-over-year surge in capital expenditures, largely tied to AI data centers, custom chips, and AWS capacity expansion.

For the upcoming quarter (Q2), Amazon expects net sales to grow between 16% and 19% year-over-year to $194 billion and $199 billion, above an estimated $188.86 billion, including an unfavorable impact of about 10 basis points from foreign exchange rates. Operating income for Q2 is expected to be between $20 billion and $24 billion.

Despite the solid beat and upbeat Q2 outlook, the market reaction was muted as investors continue to scrutinize Amazon’s aggressive spending plans. The company has signaled it remains on track for approximately $200 billion in capital expenditures for the full year, much of it directed toward AI infrastructure.

CEO Andy Jassy, however, struck an optimistic tone regarding the company’s position in the AI boom and said, “We’re in the middle of some of the biggest inflections of our lifetime, we’re well-positioned to lead, and I’m very optimistic about what’s ahead.”

How Did AMZN Retail Traders React?

On Stocktwits, retail sentiment around AMZN jumped from ‘neutral’ to ‘bullish’ territory over the past 24 hours, while message volume rose from ‘normal’ to ‘high’ levels.

A Stocktwits user expressed surprise at the dissonance between the earnings beat and the stock move.

Another highlighted that Capex spending is “way too high.”

AMZN stock has gained 40% over the past 12 months. 

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