Amazon beats Q1 earnings expectations but warns of slowdown in AWS growth

Operating margin also exceeded expectations at 3.7%, up from the estimated 2.38%. Amazon's net sales for AWS, its cloud unit, increased 16%, and the company predicts 2Q net sales guidance to range from $127 billion to $133 billion. These figures led to a 10% rise in the stock price during extended trading.

However, CFO Brian Olsavsky's remarks on the earnings call indicating AWS customer spending optimizations raised concerns among investors. AWS customer spending optimization contributed to a decline in growth rate, with revenue growth rates about 500 basis points lower in April than in Q1.

Despite the slowdown, Olsavsky reassured investors that Amazon was not optimizing for any particular quarter or year. Instead, the company's goal is to build a customer relationship and a business that will withstand changes. Still, the warning about a slowdown in growth had an immediate impact, with Amazon's shares dropping by 2%.

The earnings report revealed that Amazon's North America retail operations segment had bounced back to profitability. The segment had reported a loss of $1.5 billion in Q1 of 2022, but in 2023, the segment reported an operating income of $898 million. In addition, online store sales increased by 3% in Q1 of 2023, compared to a 1% decline in Q1 of 2022.

In conclusion, despite Amazon's earnings surpassing Wall Street's expectations, cautious comments regarding a slowdown in growth in the AWS cloud unit have raised concerns among investors. However, the company's efforts to cut costs and improve customer experiences, especially in the retail operations segment, have yielded impressive results.