Shares fell nearly 5% after hours despite Amazon delivering one of its strongest quarters in years — a signal that Wall Street is repricing how much it's willing to pay for an AI-fueled spending spree with an uncertain payoff timeline.
The Numbers Were a Blowout — On Paper
Amazon reported EPS of $2.78, up from $1.59 a year ago, on revenue of $181.5 billion — crushing analyst estimates of $1.62 and $177.2 billion, respectively.
AWS grew 28% to $37.6 billion, its fastest growth in 15 quarters, accelerating from 24% last quarter.
Operating income hit $23.9 billion, well above the high end of the company's own $16.5–$21.5 billion guidance. But investors saw through the headline: net income of $30.3 billion was inflated by $16.8 billion in pre-tax gains from Amazon's investment in AI startup Anthropic. Strip that out, and the earnings beat shrinks dramatically.
The Cash Machine Is Running Dry — For Now
Capital spending hit $44.2 billion in Q1 alone, above the $43.6 billion Street estimate. Free cash flow for the trailing twelve months collapsed to $1.2 billion, a 95% decrease year over year, primarily because of AI investments.
Consensus capex estimates have ballooned nearly 4x from $52.7 billion in 2023 to roughly $200 billion for 2026. Investors are asking a basic question: when does spending this much money start generating proportional returns?
Big AI Customers Validate Demand — But Don't Quiet the Doubters
Amazon announced that OpenAI committed to consume about 2 gigawatts of its custom chip capacity starting in 2027, Anthropic secured up to 5 gigawatts, and Meta signed on to deploy tens of millions of AWS processor cores.
Yet some analysts argue that AWS AI services' roughly $15 billion annual revenue run rate is still too small to justify a $200 billion capex year.
Q2 Guidance Beat Expectations, but the Stock Still Sold Off
Amazon projected Q2 revenue of $194–$199 billion and operating income of $20–$24 billion , topping the $188.9 billion analyst consensus.
But shares had rallied over 30% in the prior month , pricing in perfection. The sell-off reflects a market that got exactly the quarter it wanted and still couldn't stomach the price of the AI buildout eating virtually all of Amazon's free cash flow.