Amazon’s Q1 earnings beat expectations, but cautious comments regarding AWS customers’ optimizations resulted in a slowdown in growth and a 2% drop in share prices.
TWC – Amazon reported its first-quarter earnings on Thursday that exceeded expectations and initially led to increased shares. However, the slowdown in Amazon Web Services (AWS) cloud unit due to customers’ optimizations led to a significant fall in extended trading. Amazon CFO Brian Olsavsky stated that AWS customers are continuing their spending optimizations, which will significantly affect the segment’s growth. This statement spooked investors, leading to a 2% drop in Amazon’s share prices.
Revenue in Amazon’s AWS unit grew 16% in Q1, down from the 37% annual growth rate seen in the same quarter last year. Amazon’s cost-cutting efforts, which cost about $500 million in Q1, will be a central focus of the company’s earnings call. The company announced its plan to lay off 27,000 employees over the past few months.
Jassy and Olsavsky also spoke about the still-wary customer on the e-commerce and AWS sides of the business. Customers are cautious about spending during uncertain economic times and are looking for ways to save money. However, Jassy added that customers are cost-optimizing to reallocate those resources to new customer experiences.
Amazon’s Q1 earnings beat analysts’ estimates, with net sales at $127.36 billion, EPS at 31 cents, AWS net sales at $21.35 billion, operating margin at 3.7%, and Q2 net sales guidance at $127 billion – $133 billion. Amazon CEO Andy Jassy expressed satisfaction with how the teams deliver for customers amidst an uncertain economy.