Amazon crushes Q1 expectations, but clouds and tariffs loom over outlook
Despite the positive performance, a cautious forecast for the months ahead sent its stock sliding in after-hours trading.
Amazon gave Wall Street plenty to cheer about this quarter — and just enough to worry about. The e-commerce giant blew past earnings expectations, powered by strength in cloud computing and advertising, but a cautious forecast for the months ahead left investors uneasy and sent its stock sliding in after-hours trading.
For the first quarter ending March 31, Amazon reported $155.7 billion in revenue, narrowly beating analyst estimates and marking an 8.6% jump from a year earlier. Profits surged, with net income hitting $17.1 billion, or $1.59 per share, well above the $1.37 that Wall Street expected and up sharply from last year’s $10.4 billion, or 98 cents per share.
Yet behind the headline numbers, cracks are starting to show, particularly in the cloud business. Amazon Web Services, its longtime cash cow, grew 17% to $29.3 billion, falling just shy of forecasts and posting its third consecutive revenue miss. That slowdown contrasts with rival Microsoft’s Azure, which beat expectations in its latest quarter.
Emmanuel Oyedeji
Advertising, on the other hand, was a clear standout. Sales from Amazon’s ad unit jumped 19% year over year to $13.9 billion, outpacing the growth of its retail operations. North American sales rose 8% to $92.9 billion, while international revenue increased 5% to $33.5 billion.
Overall operating profit landed at $18.4 billion, a 5% beat over analyst estimates, and operating margins improved to 11.8% from 10.7% a year ago. However, free cash flow slipped into the red, dropping to -5.1% from 3.5% a year prior.
Looking ahead, Amazon expects second-quarter sales between $159 billion and $164 billion, in line with analyst forecasts, but its projected operating income of $13 billion to $17.5 billion fell short of the $17.6 billion consensus.
Compounding investor concerns, Amazon flagged tariffs and trade policies as potential risks, a shift in tone from prior quarters. With some Chinese imports now facing tariffs as high as 145%, many third-party sellers on Amazon’s platform are raising prices, cutting ad budgets, or even considering skipping July’s Prime Day, one of Amazon’s most important sales events.
While Amazon’s first-quarter report confirms its dominance, it also reminds investors that even the biggest players can’t outrun global headwinds. Whether the company can keep up the momentum amid slowing cloud growth and trade tensions will be the big question for the rest of the year.
