Amazon Exceeds Cloud Growth Estimates Amid Strong Demand for Artificial Intelligence Services

Amazon Beats Cloud Revenue Growth Estimates, Shares Dip Amid Lower Operating Income Projections

Amazon.com exceeded Wall Street estimates for quarterly cloud revenue growth on Wednesday, driven by strong enterprise spending on its cloud computing services as companies step up artificial intelligence adoption.

Revenue at Amazon Web Services (AWS), the world's largest cloud services provider, jumped 28% to $37.6 billion in the first quarter ended March, surpassing analysts' average estimate of a 25.08% increase to $36.61 billion, according to data compiled by LSEG.

Shares of the company dipped 2% in volatile extended trading after it projected current-quarter operating income between $20 billion and $24 billion, slightly lower than estimates of $22.62 billion at midpoint.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The upbeat cloud revenue comes as Amazon has already boosted investor confidence by deepening its partnership with the two biggest AI firms, OpenAI and Anthropic, within days of each other. On Tuesday, Amazon made available all of OpenAI's latest models and its coding agent, Codex, on AWS, taking advantage of loosened ties between the ChatGPT maker and cloud rival Microsoft.

Last week, Amazon stuck a deal to invest up to $25 billion in Anthropic, while the Claude creator committed to spending more than $100 billion on AWS in the next 10 years. The announcements, coupled with a disclosure earlier this month that AI services at AWS were generating more than $15 billion in annualized revenue, have helped push Amazon's stock up some 14% so far this year, putting it among the best performers in the "Magnificent 7" group of tech mega-caps.

Amazon, which has set a target of around $200 billion in capital spending this year, has been going all out to reassure investors that its spending on AI infrastructure will generate returns in the near term. CEO Andy Jassy said in his shareholder letter this month that much of the company's 2026 spending will be monetized over 2027 and 2028.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Still, the roughly $600 billion that Big Tech is expected to pour into AI this year - a historic outlay that has dented cash flows at these companies - is testing investors' patience, even as companies say that it is necessary to increase computing capacity as strong AI demand outstrips supply.

At its retail business, Amazon has been investing in expanding same-day delivery to more towns and small cities, and has sharpened focus on grocery delivery in a bid to better compete with supermarket chains such as Walmart and Kroger.