dailyloe.com – Amazon is scheduled to announce its first-quarter earnings after the market closes on Wednesday. Revenue is expected to rise by 14%, an increase from last year’s 8.6% growth to $155.7 billion. This forecast aligns closely with the previous quarter’s growth of 13.6%.
Investors are particularly focused on Amazon’s cloud business, which is anticipated to grow approximately 26% year-over-year. AWS revenue had increased almost 24% in the fourth quarter, surpassing analysts’ expectations and representing its fastest growth in three years.
Amazon and other major tech companies are under pressure to validate their significant investments in artificial intelligence, projected to reach $700 billion by 2026. Microsoft, Alphabet, and Meta are also set to report earnings after the bell on Wednesday, marking the first updates since the U.S.-Iran conflict began in February.
This conflict has caused supply chain disruptions and led to rising oil prices, prompting Amazon to implement a 3.5% fuel surcharge for some third-party sellers. Earlier in February, Amazon estimated its capital expenditures would hit $200 billion by 2026, a notable increase from last year and exceeding analysts’ expectations by over $50 billion.
The company is rapidly expanding its data centers and infrastructure to accommodate the growing demand for AI services. CEO Andy Jassy indicated that AWS could be experiencing even faster growth if more capacity were available, citing high demand for both core and AI workloads.
In his recent shareholder letter, Jassy revealed that AWS’s AI revenue run rate reached $15 billion in the first quarter and is increasing rapidly. During this period, Amazon enhanced its investments in OpenAI and Anthropic, both of which have committed to utilizing more of AWS’s cloud computing resources over several years.
Stifel analysts noted that Amazon’s capital expenditures might increase further this year due to these investments. They stated, ‘While not explicit capex spend, both investments are likely to lead to ramping compute spend presumed to be funneled back into AWS spend.’
They raised questions about whether the current capital expenditure guidance is adequate to meet the potential increase in workloads at AWS. Stifel maintains a buy rating on Amazon.
