AMAZON COM INC Q1 2026 earnings call

Hello, Welcome to our Q1 2026 financial results conference call. Joining us today to answer your questions is Andy Jassy, our Chief Executive Officer, and Brian Olsavsky, our Chief Financial Officer. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025. Our comments and responses to your questions reflect management's views as of today, April 29th, 2026 only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions.

Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including for memory chips, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. Now I'll turn the call over to Andy.

Thanks, Dave. We're reporting $181.5 billion in revenue, up 17% year-over-year. Excluding the $2.9 billion favorable impact from foreign exchange, net sales increased 15%. Operating income was $23.9 billion. Q1 was a strong quarter for Amazon. Starting with AWS, growth continued to accelerate, up 28% year-over-year, the fastest growth rate in 15 quarters, up $2 billion quarter-over-quarter, the largest Q4 to Q1 AWS revenue increase ever. AWS is now a $150 billion annualized revenue run rate business. It's very unusual for a business to grow this fast on a base this large. The last time we saw growth at this clip, AWS was roughly half the size. We've never seen a technology grow as rapidly as AI.

Amazon is already a leader. Companies continue to choose AWS for AI. To put our growth in perspective, three years after AWS launched, it had a $58 million revenue run rate. In the first three years of this AI wave, AWS's AI revenue run rate is over $15 billion, nearly 260x larger. There are several reasons customers are choosing AWS for AI. First, we've built broader capabilities than others. That includes model building with SageMaker, which reduces training time by up to 40%, high-performance inference with the leading selection of frontier models in Bedrock, which saw 170% growth in customer spend quarter-over-quarter. It processed more tokens in Q1 than all prior years combined. We're excited to make OpenAI's models available in Bedrock. Yesterday, we added OpenAI's GPT 5.4 model, with 5.5 coming soon.

Yesterday, we also started the preview of Amazon Bedrock Managed Agents, powered by OpenAI, the stateful runtime environment that enables any organization to build generative AI applications and agents at production scale. We believe that modern agentic applications will be stateful, and this new technology will rapidly accelerate agentic AI adoption. OpenAI has said they're already seeing unprecedented demand for this new product, and we're seeing heavy customer interest as well. Most of the value companies derive from AI will be through agents, and AWS customers can build agents with their proprietary data in Strands, which has been downloaded more than 25 million times and saw 3x more downloads quarter-over-quarter. Customers can deploy agents with enterprise scale, security, and reliability with AgentCore, which is being used to deploy an agent as frequently as every 10 seconds.

We also offer turnkey agents for coding, software migrations, business operations, and knowledge workers in Amazon Q, AWS Transform, Amazon Connect, and Amazon Quick. They continue to resonate with customers. The number of developers using Amazon Q more than doubled quarter-over-quarter, and enterprise customer usage increased nearly 10x. Customers have used AWS Transform to save over 1.56 million hours of manual effort when migrating and modernizing their workloads. The number of new customers using Amazon Quick has grown more than 4x quarter-over-quarter, and we just announced V1 of our Amazon Quick desktop app yesterday.

It's very compelling, as it can query your email, calendar, Slack, local files, and several other applications you use every day to flag important communications, retrieve and summarize information, make recommendations, compose and send communications to others to create agents that highlight or automatically do work that you used to have to do yourself.

You can easily keep refining your preferences. Quake's advanced knowledge graph enables its AI agents to automatically learn from your interactions to become more personalized over time. One of our enterprise customers just told us, "Quake isn't just improving how we work, it's letting us reimagine it." Second, another reason customers continue choosing AWS, is that as they expand their use of AI, they want their inference to reside near their other applications and data, and much more of it resides in AWS than any place else. Third, as customers expand their AI usage, they also want to consume additional non-AI services. They're choosing AWS because we've built the broadest and most capable core offerings by a wide margin. We offer thousands of features across compute, storage, databases, analytics, security, and more. Gartner consistently recognizes AWS's leadership across their major cloud evaluation areas.

Fourth, AWS has the strongest security and operational performance of any AI and infrastructure provider, and startups, enterprises, and governments continue to choose AWS as the foundation for their most critical workloads. These are some of the reasons even more customers are choosing AWS. Just since last quarter's call, we've announced new agreements with OpenAI, Anthropic, Meta, NVIDIA, Uber, U.S. Bank, Fox, Southwest Airlines, U.S. Army, Bloomberg, Cerebras, AT&T, Nokia, Fundamental, the National Geographic Society, PGA Tour, and many more. Our chips business continues to grow rapidly and is larger than what a lot of folks thought. We saw nearly 40% quarter-over-quarter growth in Q1, and our annual revenue run rate is now over $20 billion and growing triple-digit percentages year-over-year. This somewhat masks the size.

If our chips business was a standalone business and sold chips produced this year to AWS and other third parties, as other leading chip companies do, our annual revenue run rate would be $50 billion. As best as we can tell, our custom silicon business is now one of the top three data center chip businesses in the world, the speed at which we've gotten here is extraordinary. We have momentum. For our custom AI silicon, we've recently shared very large multi-year, multi-gigawatt training commitments from the two leading AI labs in the world, Anthropic and OpenAI, as well as an increasing number of companies like Uber betting on Trainium. We now have over $225 billion in revenue commitments for Trainium. Our Trainium2 chip has about 30% better price performance than comparable GPUs and is largely sold out.

Trainium3, which just started shipping at the start of 2026 and is 30%-40% more price performant than Trainium2, is nearly fully subscribed. Much of Trainium4, which is still about 18 months from broad availability, has already been reserved. Amazon Bedrock, which is used expansively by over 125,000 customers, runs most of its inference on Trainium, and almost 80% of the Fortune 100 companies are using Bedrock. We also just announced that Meta is committed to using tens of millions of Graviton cores. Graviton is our industry-leading CPU chip, which allows Meta to run the CPU-intensive workloads behind agentic AI with the performance and efficiency they need at their scale.

AI is commonly seen as a GPU story, but the rise of agentic workloads, real-time reasoning, code generation, reinforcement learning, and multi-step task orchestration is driving massive CPU demand as well. As AI systems shift from answering questions to taking actions, and as post-training and inference scale up, the compute required pulls heavily on CPUs. That's why Meta chose Graviton, which delivers up to 40% better price performance than any other 86 processors, and now used by 98% of the top 1,000 EC2 customers. Nobody has a better set of chips across AI and CPU workloads than AWS with Trainium and Graviton, and we're unusually well-positioned for this AI inflection we're in the early stages of experiencing. While the largest number of AI chips we're bringing in are Trainium, we continue to have a deep partnership with NVIDIA.

We have immense respect for them, continue to order substantial quantities, we'll be partners for as long as I can foresee, and we will always have customers who want to run NVIDIA on AWS. We will also have a very large chips business ourselves. Customers always want choice. It's always been true and always will be true. Different companies will offer different benefits for customers, and the uniquely strong price performance that Trainium offers is compelling to our external and internal customers. For perspective, it's scale. We expect Trainium will save us tens of billions of dollars of CapEx each year and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference. Finally, we continue to be confident in the long-term CapEx investments we're making.

Of the AWS CapEx we intend to spend in 2026, much of which will be installed in future years, we have high confidence this will be monetized well, as we already have customer commitments for a substantial portion of it, and that it will yield compelling operating margins and ROIC. As we've been sharing, the faster AWS grows, the more short-term CapEx we'll spend. AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetize it, typically six to 24 months before we start billing customers, depending on the component. However, these CapEx investments fund assets with many year useful lives, 30+ years for data centers, five to six years for chips, servers, and networking gear. The free cash flow and ROIC for these investments are cumulatively quite attractive a couple years after being in service.

Thanks, Andy. Let's start with our top-line financial results. Worldwide revenue is $181.5 billion, a 15% increase year-over-year, excluding the 180 basis points favorable impact of foreign exchange. Worldwide operating income was $23.9 billion with an operating margin of 13.1%, our highest operating margin ever. Across all segments, we continue to innovate for customers while operating more efficiently. In the North America segment, first quarter revenue was $104.1 billion, an increase of 12% year-over-year. International segment revenue was $39.8 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange. Our seasonal shopping events performed well in Q1, including our big spring sale.

We also saw particularly strong performance with third-party sellers, who are important contributors to our broad selection and competitive pricing. Our sellers saw strong sales growth in Q1, particularly in the U.S, as well as in Europe and Brazil, where we've recently lowered seller fees. We're seeing our investments in the seller experience resonate and, in turn, grow our business. Prime continues to fuel our growth and reflects the value members receive from the program. Prime Video is a key pillar of the Prime value proposition, an important driver of new member acquisition. Our investments in original and exclusive content and live sports, combined with our third-party partner titles, offer the best selection of premium video content. In addition to delivering compelling value to Prime members, advertisers, and partners, Prime Video is now a large and profitable business in its own right. Let's shift to segment profitability.

North America segment operating income was $8.3 billion with an operating margin of 7.9%. International segment operating income was $1.4 billion with an operating margin of 3.6%. We are pleased with the fulfillment network performance in Q1. The team has worked hard to optimize our network. Overall unit growth at 15% continues to outpace our cost to operate the fulfillment network as outbound shipping costs grew 12% year-over-year and fulfillment expense grew 9% year-over-year, both on an FX neutral basis. As our network efficiency improves, we're able to deliver items faster and improve the customer experience, while at the same time lowering our cost to serve.

Looking ahead, we see meaningful opportunities to further enhance productivity across our global fulfillment network, all while continuing to raise the bar in delivery speed. We will keep optimizing inventory placement to shorten distance traveled, reduce touches per package, and improve consolidation rates. Alongside these efforts, we deploy robotics and automation, which have been integral to our operations for decades. Our latest generation technologies offer a step change in efficiency, which we're deploying in both new and existing facilities. All of our U.S. large format fulfillment center launches in 2026 will have this latest generation technology. We're seeing early positive results with improved site safety, higher productivity, and lower cost to serve. Moving to our AWS segment, revenue is $37.6 billion and growth accelerated 480 basis points to 28% year-over-year, driven by both core and AI services.

We continue to see customers increase cloud migrations and scale their use of AWS core services. Customers seeking the full benefit of AI are accelerating their transition to the cloud. We also see a strong correlation between AI spend and core growth. As customers spend more on AI, we see a corresponding demand increase in core. We expect this to increase over time as customers move more AI workloads into production, strengthening demand for our core services. Our AI revenue is growing triple digits year-over-year. We're bringing more capacity online to meet high customer demand while also driving meaningful efficiency gains across our installed base. Our AI offerings continue to gain traction with customers, and Bedrock has been a significant growth driver. In 2025, we delivered 4x improvements in Trainium 2's token throughput.

Since the majority of Bedrock's workloads run on Trainium, these efficiency gains directly translate into more capacity to serve customers. AWS operating income was $14.2 billion and reflects our strong growth coupled with our focus on driving efficiencies across the business. Turning to total company capital expenditures. Our cash CapEx is $43.2 billion in Q1. This primarily relates to AWS and generative AI as we invest to support strong customer demand. We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow. I'll finish with our financial guidance for Q2.

The following guidance assumes that Prime Day occurs in the second quarter in most of our largest geographies, including the U.S., and that Prime Day occurs in the third quarter in Australia, Brazil, India and Japan. Note that in 2025, Prime Day was in Q3 for all countries. Q2 net sales are expected to be between $194 billion and $199 billion. We estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately 10 basis points in the quarter. Q2 operating income is expected to be between $20 billion and $24 billion. We continue to see strong sales trends carrying into Q2, and I'll mention a few items on the operating income guidance.

First, this estimate includes the impact of our seasonal step-up in stock-based compensation expense in Q2, driven by the timing of our annual compensation cycle. Second, within the North America segment, we do expect a year-over-year cost increase of approximately $1 billion related to Amazon Leo as we manufacture and launch more satellites in preparation for our service offering. Amazon Leo's commercial service is on track to launch in Q3, and we expect to begin capitalizing certain costs in Q4, including production and launch costs. Third, our guidance anticipates higher transportation costs related to fuel inflation, which is partially offset by the recently implemented fuel and logistics-related FBA surcharge. I'm thankful to our teams across the company for their hard work and dedication to customers.

We remain focused on driving an even better customer experience, which is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.