Amazon investors got a clean cloud beat on Wednesday. They also got a free cash flow line that fell 95% in a year.
That is what an AI build-out looks like at Amazon's scale. Lots of growth on the top line. Lots of cash flowing right back out the door into data centers.
Amazon reported Q1 EPS of $2.78 versus a $1.64 estimate, and revenue of $181.52 billion versus $177.30 billion expected. AWS revenue hit $37.59 billion, up 28% year over year. That was the fastest AWS growth in more than three years and ahead of Wall Street's 26% expectation.
Advertising revenue grew 24% to $17.24 billion, also above the $16.87 billion estimate. Online stores revenue, still the biggest single segment, came in at $64.3 billion, up 12%.
The stock rose more than 4% in extended trading.
Amazon's trailing 12-month free cash flow fell to $1.2 billion, a 95% drop from the prior year. The company said the decline was primarily because of AI investments. Property and equipment expenses for Q1 alone hit $44.2 billion.
Amazon has been clear about the spending. The company said in February that 2026 capex will reach $200 billion, a sharp increase from last year. AI industry capex overall could approach $700 billion in 2026.
CEO Andy Jassy said: "We're in the middle of some of the biggest inflections of our lifetime, we're well positioned to lead, and I'm very optimistic about what's ahead for our customers and Amazon."
Amazon also flagged a meaningful new spending bucket. The company said it will buy Globalstar in a deal valued at roughly $11.57 billion, the second-largest acquisition in Amazon's history. Apple owns 20% of Globalstar and will use Amazon's satellite connectivity for some products as part of the deal.
"They have unusual and scarce global spectrum that's required to provide direct to device," Jassy said on the earnings call. The deal also "afforded us the opportunity to build a deep relationship with Apple."
Amazon's Project Kuiper satellite service, marketed as Leo, is targeting commercial launch in Q3. About 270 of an eventual 7,700 satellites are currently in service.
Q2 sales guidance came in at $194 billion to $199 billion versus a $188.9 billion estimate. Q2 operating income guidance was $20 billion to $24 billion. Amazon's headcount fell by 1,000 since Q4, with the company planning 16,000 corporate layoffs in Q1 plus 14,000 in October. The next data point is the Q3 launch of the Leo service.
