Amazon ( AMZN ) reported first-quarter earnings that topped Wall Street estimates on both the top and bottom lines, sending shares of the retail giant up about 2% in premarket trading on Wednesday.
Driven by a strong showing from its cloud computing division, Amazon continued a wave of big tech decisions that largely surprised Wall Street as investors turned their attention to the conclusion of the Federal Reserve's May policy meeting on Wednesday.
Net sales rose 13% from the same period last year to $143.3 billion, Amazon reported late Tuesday, topping analysts' expectations of $142.6 billion, per Bloomberg data. The beat was driven by a 16% increase in Amazon Web Services (AWS) revenue, which Amazon said generated $100 billion annually.
The company reported adjusted earnings per share of $0.98, versus consensus estimates of $0.83.
Like its rivals Microsoft and Alphabet, Amazon is using its strength in its cloud computing business to gain an edge in the nascent AI market. AI tools require large amounts of data and processing power to train and run large language models and their applications, relying on cloud providers to provide core infrastructure.
Amazon CFO Brian Olszowski said on a call with reporters that overall capital spending is expected to increase “meaningfully” this year through 2023, driven by higher infrastructure costs to support AWS's growth.
Amazon is seeing strong demand on the AWS side, with customers signing up for longer contracts with larger commitments, with many developing AI components, he said.
Advertising was another strong contributor to Q1 revenue growth. The company matched analyst expectations of $11.8 billion, up 24% from the same period last year.
Even as Amazon dazzled with growth across its businesses, its outlook revealed few signs of a pullback in consumer spending.
“What we're seeing is a continuation of what we've said in previous quarters. Customers in the U.S. are being more careful about their spending. They're looking for deals. They're shopping around,” Olsavsky said. “That trend continues in Q2.”
Amazon forecast Q2 net sales to come in between $144 billion and $149 billion, slightly below the analyst estimate of $150.2 billion, per Bloomberg data.
Amazon's report came a week after its cloud and AI rival Microsoft ( MSFT ) posted an impressive quarter that beat expectations on the strength of its cloud computing business. The market cheered even louder for results from Google parent Alphabet ( GOOG , GOOGL ), which performed well on the top and bottom lines and came out with a new dividend announcement.
Amazon, which has positioned itself on the AI front, is another player competing to claim market share and launch new consumer services. In March, Amazon increased its investment in AI startup Anthropic, pouring in another $2.75 billion, bringing its investment total to $4 billion.
Amazon stock, which tied with the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year.
Hamza Shaban is a correspondent for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
Click here for in-depth analysis including the latest stock market news and stock moving events
Read the latest financial and business news from Yahoo Finance
