Amazon.com (AMZN.O) reported first-quarter results that fell short of investor expectations in key areas, including cloud revenue growth and operating income projections, leading to a dip in its stock price after hours.
Shares of the e-commerce giant dropped by as much as 5% in extended trading before recovering slightly to a 1% loss.
Amazon Web Services (AWS), the company’s cloud division, saw revenue grow 16.9% to $29.27 billion. However, this came in below Wall Street’s expectation of 17.4% growth and $30.9 billion in sales. It also marked AWS’s slowest revenue growth in five quarters. In contrast, rival Microsoft (MSFT.O) beat expectations for its Azure cloud unit, raising the bar for Amazon and fueling disappointment when AWS failed to keep pace.
“Microsoft posted great numbers, so expectations for Amazon were higher,” said Dave Wagner, portfolio manager at Aptus Capital Advisors. Analyst Gil Luria of D.A. Davidson echoed the sentiment, noting investors had elevated hopes for AWS following Microsoft’s strong performance.
Adding to the uncertainty are renewed tariff pressures. New tariffs on Chinese imports, initiated by former President Donald Trump, are causing unease among retailers. Some sellers may skip Amazon’s Prime Day in July due to cost concerns, according to Reuters.
For the current quarter, Amazon forecast operating income between $13 billion and $17.5 billion — lower than the average estimate of $17.7 billion, based on LSEG data.
On a call with analysts, CEO Andy Jassy acknowledged concerns over tariffs but said demand has not weakened. He noted increased buying in certain categories, possibly as customers stock up in anticipation of price hikes. “We haven’t seen the average selling price of retail items appreciably go up yet,” Jassy added, pointing out steady growth in low-cost essential sales.
Meanwhile, revenue from third-party seller services slowed significantly, growing only 7% in Q1 when excluding currency fluctuations.
Despite these concerns, Amazon’s overall performance wasn’t entirely gloomy. The company reported total revenue of $155.7 billion for Q1 — slightly above the $155.04 billion analysts expected. Its Q2 net sales guidance of $159 billion to $164 billion also beat the average estimate of $160.91 billion, offering some reassurance to investors.
Jassy reaffirmed Amazon’s focus on keeping prices low and said the company is urging sellers to shift inventory to the U.S. ahead of potential tariff increases. He also pushed back against reports that Amazon planned to label import costs on its platform — a point reportedly discussed between Trump and Amazon founder Jeff Bezos.
One bright spot was advertising: Amazon saw a 19% jump in online ad sales to $13.92 billion, surpassing estimates and cementing its role as a top player behind Meta and Alphabet in the digital ad market.
