Amazon Q1 Earnings Deep Dive: AWS Revenue Growth Accelerates, AI Investment About to Enter Payoff Period, Stock Price May Rise to $300

The core highlight of Amazon's latest earnings report is that AWS revenue growth exceeded market expectations.

The report shows that Amazon's AWS business generated $37.6 billion in first-quarter revenue, representing a 28% year-over-year increase, which surpassed the market expectation of 25%. This marks the fastest revenue growth rate since the second quarter of 2022. For Amazon, the world's largest cloud provider, this re-acceleration on such a massive base is sufficient to bolster market confidence.

Investing.com analyst Jesse Cohen summarized the highlight of Amazon's earnings as a significant re-acceleration in AWS sales growth, emphasizing that customers are fully embracing new AI workloads.

Amazon explicitly mentioned in its earnings report and subsequent disclosures that the annualized revenue run rate for AWS's AI services has exceeded $15 billion, while its chip business run rate has surpassed $20 billion.

Amazon's recent moves corroborate this. Amazon has integrated OpenAI's latest models and Codex directly into AWS while continuing to deepen its partnership with Anthropic, which has committed to spending over $100 billion on AWS over the next 10 years; Amazon has also added up to $25 billion in investment to Anthropic. This means AWS is not just an AI infrastructure provider but also a core computing power host for AI model developers.

Compared to cloud service competitors, although Google ( GOOGL )'s Google Cloud grew faster in the first quarter, AWS leveraged its massive market scale to regain growth momentum while maintaining its volume advantage, prompting the market to re-recognize its valuation premium. D.A. Davidson analyst Gil Luria noted that while Google Cloud's growth advantage makes AWS look slightly less impressive by comparison, it has not shaken its core position in the cloud infrastructure sector.

Latest data indicates that cumulative AI capital expenditures by Amazon and other cloud giants will exceed $600 billion in 2026; Amazon management stated it will maintain its $200 billion AI investment target for this year.

However, excessive capital expenditures could put Amazon's cash flow under pressure. Amazon's first-quarter capital spending reached $44.2 billion, a 76% year-over-year increase that exceeded market expectations; trailing 12-month free cash flow fell sharply to $1.2 billion, down from $25.9 billion in the prior-year period.

Addressing this, Amazon CEO Jassy emphasized in a shareholder letter that "much of the spending in 2026 will be monetized in 2027-2028."

Notably, according to Amazon's disclosures, the annualized revenue run rate for AWS AI services has exceeded $15 billion, and the run rate for its chip business has surpassed $20 billion, with the latter growing nearly 40% quarter-over-quarter. These figures demonstrate that Amazon's AI investments are beginning to yield measurable revenue streams. For investors, such disclosures are more compelling than a mere AI narrative, as they reflect more direct realization of results.

From the perspective of Amazon's advertising and retail operations, advertising revenue this quarter grew 24% year-over-year to $17.2 billion, indicating that the advertising business remains one of the company's most stable and profit-resilient growth segments.

Meanwhile, North American retail revenue grew 12% to $104.1 billion, while international retail revenue rose 19% to $39.8 billion, both maintaining healthy expansion. For a company already at such a massive scale, the steady growth of core operations demonstrates that core retail and advertising have not been undermined by AI-related capital expenditures.

More importantly, Amazon's retail business continues to strengthen its fulfillment advantages. Management noted that more than 1 billion items have been delivered via same-day or next-day shipping since 2026; such improvements in logistical efficiency will continue to fortify the competitive moat for its e-commerce and advertising businesses.

Market institutions are currently broadly optimistic about Amazon's stock outlook.

Among the 22 analysts tracked by Visible Alpha, 20 have issued "buy" ratings and 2 remain "neutral," with an average price target of nearly $283. Ahead of the earnings report, JPMorgan raised its price target to $280, Bank of America hiked its to $298, and HSBC maintained a bullish stance, citing the strong growth resilience of AWS.

Based on Amazon's monthly chart, the stock has broken through the Fibonacci 0.618 extension resistance level at $260.65. If the monthly closing price stabilizes above this level, it will open the door for further upside toward $287.65, with the potential to test the psychological resistance at the $300.00 round-number mark.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.