Amazon’s first-quarter results showed a slower pace of growth in its AWS cloud computing business, compared to expectations and to recent gains reported by competitors.
CNBC reported that AWS’s revenue increased 16.9% year over year to $29.27 billion, just under forecasts that predicted 17.4% growth and $30.9 billion in sales. The shortfall marked the slowest growth for AWS in five quarters.
The results followed Microsoft’s stronger-than-expected report on Wednesday, which showed Azure revenue growing 33% in the same period. That performance appeared to raise expectations for AWS, according to analysts. Amazon’s shares initially dropped by as much as 5% in after-hours trading before narrowing losses to around 1%.
While total revenue for the quarter ending March 31 reached $155.7 billion – slightly ahead of estimates – investors focused on AWS performance and the company’s near-term outlook.
Amazon’s forecast for second-quarter revenue was between $159 billion and $164 billion, compared to analyst expectations of $160.91 billion. CEO Andy Jassy addressed concerns over recently-announced US tariffs on Chinese goods, telling analysts that the company had not seen a drop in demand but had noticed an increase in buying activity in specific product categories. This could indicate that consumers and sellers are ready for potential price changes.
Jassy said that Amazon had not yet observed a significant rise in average selling prices for retail items. He noted steady sales in low-cost essentials and said the company continues to encourage sellers to move inventory to the US ahead of tariff-related impacts.
Third-party seller services’ revenue grew 7% in the quarter, excluding foreign exchange effects, reflecting a slowdown from previous periods. In contrast, Amazon’s online advertising business grew 19% to $13.92 billion, beating expectations. The company now ranks among the top ad platforms by revenue, behind only Meta and Alphabet.
Meanwhile, Microsoft’s cloud unit posted stronger growth and signalled continued investment in AI infrastructure. The company’s total revenue reached $70.07 billion, above the expected $68.42 billion. Earnings per share came in at $3.46, also ahead of estimates. Azure’s 33% revenue growth included a 16-point contribution from AI services. Microsoft projects Azure to grow between 34% and 35% in the current quarter, according to its earnings call.
Capital spending at Microsoft rose sharply to $16.75 billion, a 53% year-over-year increase, driven by continued expansion of AI capabilities. CFO Amy Hood said infrastructure for AI was coming online faster than expected, with demand outpacing supply and capacity constraints anticipated beyond June.
The Intelligent Cloud division, which includes Azure, generated $26.75 billion in revenue. Microsoft’s productivity segment – home to Office and LinkedIn – grew 10% to $29.94 billion. LinkedIn’s Talent Solutions business remains under pressure from a weaker hiring market, according to Hood.
Microsoft also reported growth in its personal computing division, which includes Windows, hardware, and gaming. Revenue in that segment rose 6% to $13.37 billion, exceeding expectations. Sales of Windows licenses to device makers increased 3% as inventory levels remained high amid tariff concerns. Gartner estimated a 4.8% increase in global PC shipments for the quarter.
Separately, Alphabet also reported earnings that showed steady performance across its businesses. First-quarter revenue reached $90.23 billion, up 12% year over year and ahead of the $89.12 billion forecast. Earnings per share came in at $2.81, though adjusted EPS excluding gains on investments was $2.27 – still above estimates.
Alphabet’s Google Cloud revenue rose 28% to $12.26 billion, just short of projections. However, the unit’s margin improved to 17.8%, up from 9.4% a year earlier. Advertising brought in $66.89 billion, with YouTube ads contributing $8.93 billion. AI Overviews, Google’s generative AI search feature, now reaches 1.5 billion users monthly.
Alphabet also noted potential impacts from the US ending the de minimis tariff exemption, which could affect APAC-based advertisers and influence digital ad spending later in the year.
In all three companies, AI infrastructure and cloud services remain key focus areas. While Amazon’s retail and advertising businesses continue to grow, its cloud unit’s performance and near-term guidance have left some investors cautious – especially as Microsoft and Alphabet report stronger growth in adjacent areas.
(Image by CNBC YouTube)
See also: Amazon stock drops as cloud revenue misses expectations
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