Amazon (AMZN, Financial) shares dipped slightly after announcing its Q1 earnings. The company reported its fourth consecutive EPS beat of over $0.20, though it was the smallest in this period. Revenue increased by 8.6% year-over-year to $155.7 billion, aligning with expectations. This marks Amazon's first single-digit year-over-year revenue growth since Q1 2023, with a 10% growth in constant currency.
Key highlights from the report include:
- Amazon does not provide EPS guidance but focuses on operating income. Q1 operating income rose by 20% year-over-year to $18.4 billion, surpassing the prior guidance of $14-18 billion. However, Q2 guidance of $13.0-17.5 billion is considered slightly below street estimates.
- The Stores segment saw 8% constant currency growth in both North America and international markets. This growth is slower than recent quarters due to a larger base. To attract value-conscious consumers, Amazon held global deal events in Q1, including the Big Spring sale and Ramadan Eid sale. A Prime Day event is scheduled for July.
- Despite tariffs, Amazon has not observed a decrease in demand. In fact, there is increased buying in certain categories, possibly due to stockpiling ahead of potential tariff impacts.
- Amazon Web Services (AWS) sales grew by 16.9% year-over-year to $29.27 billion, driven by both generative AI and non-generative AI offerings. The company noted that over 85% of global IT spending is still on-premises, but this is expected to shift over the next 10-20 years.
- Advertising Services revenue increased by 19% in constant currency to $13.92 billion, showing a slight improvement from the downward trend in recent quarters. Advertising remains a key profitability driver in both North America and international segments.
Overall, Amazon's report was solid but not spectacular, meeting most expectations. Investors are likely relieved that tariffs have not significantly impacted demand yet. However, the slightly lower Q2 operating income guidance is a concern.
