Amazon (AMZN) Stock Jumps 4% After Blowout AWS Quarter and AI Chip Demand Signal

TLDR

• AWS revenue jumped 28% year-over-year to $37.6 billion, beating Wall Street estimates
• Amazon reported Q1 EPS of $2.78 vs $1.63 expected; total revenue hit $181.5 billion vs $177.3 billion expected
• CEO Andy Jassy revealed over $225 billion in revenue commitments for Trainium, AWS’s AI chip
• Q2 revenue guidance of $194–$199 billion topped analyst estimates of $189 billion; operating income guidance midpoint came in slightly below expectations
• Free cash flow fell 95% year-over-year to $1.2 billion for the trailing 12 months; capital expenditure hit $44.2 billion in Q1

Amazon delivered a clean earnings beat on Wednesday, and the headline numbers were hard to argue with. Q1 EPS came in at $2.78 against expectations of $1.63, and total revenue reached $181.5 billion, above the $177.3 billion Wall Street had penciled in.

AWS was the standout. Cloud revenue rose 28% year-over-year to $37.6 billion, topping analyst estimates of $36.9 billion and accelerating from 24% growth the prior quarter. CEO Andy Jassy called it AWS’s fastest growth in 15 quarters.

Amazon.com, Inc., AMZN

The stock initially dipped in after-hours trading before reversing course. By the end of the earnings call, AMZN was up roughly 4% in after-hours action.

The reversal came after Jassy disclosed that Amazon now holds over $225 billion in revenue commitments for Trainium, its in-house AI chip. That figure got investors’ attention and helped flip the mood on the call.

Free Cash Flow Takes a Hit

Not everything was clean. Free cash flow for the trailing 12 months dropped 95% year-over-year to just $1.2 billion. Capital expenditures for Q1 came in at $44.2 billion, up more than 76% from the prior year and above analyst estimates of $41.4 billion.

Amazon has been ploughing money into AI infrastructure. In February, management guided for roughly $200 billion in capital spending for full-year 2026 — a figure that rattled investors at the time. On Wednesday, Jassy held the line on that number, framing the spend as necessary to meet demand that currently outstrips supply.

He also noted in his shareholder letter earlier this month that much of the 2026 spending is expected to generate returns in 2027 and 2028.

Q2 operating income guidance came in at $20–$24 billion. The midpoint of $22 billion sits slightly below Wall Street’s $22.7 billion estimate, which added some caution to an otherwise upbeat report.

Deals, Ads, and Delivery

Amazon has been busy beyond the earnings call. Last week, it struck a deal to invest up to $25 billion in Anthropic, with Anthropic committing to spend more than $100 billion on AWS over the next decade. On Tuesday, Amazon made all of OpenAI’s latest models and its Codex coding agent available on AWS.

Ad revenue grew 24% year-over-year to $17.2 billion. Amazon has been expanding ad placements across Prime Video and even grocery shopping carts.

Q2 revenue guidance of $194–$199 billion topped analyst estimates of $188.9 billion, though that range accounts for a slight drag from foreign exchange headwinds.

AWS AI services are now generating more than $15 billion in annualised revenue, per an earlier company announcement this month.

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