Amazon set to report first-quarter earnings after the bell

Amazon is poised to release its first-quarter earnings report following the market's closure on Wednesday. Analysts are keenly anticipating the company's performance, with revenue projections suggesting a robust 14% increase compared to the same period last year. This growth outpaces the previous year's 8.6% rise to $155.7 billion and aligns closely with last quarter's growth rate of 13.6%. Investors will be particularly focused on Amazon's cloud segment, AWS, which is expected to see a substantial revenue boost of around 26% from the previous year. AWS had already shown strong performance in the fourth quarter with a nearly 24% increase, surpassing analyst expectations and marking its most rapid growth in three years. As Amazon and other tech giants defend their significant investments in artificial intelligence, projected spending could reach an astonishing $700 billion by 2026. On the same day, industry counterparts Microsoft, Alphabet, and Meta will also share their financial updates, marking the first joint disclosure since the onset of the U.S.-Iran conflict earlier this year, which has led to supply chain challenges and rising oil prices. Notably, Amazon had to implement a 3.5% fuel surcharge for select third-party sellers in light of these circumstances. Earlier this year, Amazon anticipated capital expenditures could soar to $200 billion by 2026, a notable increase from prior estimates and significantly above analyst forecasts. The company is rapidly expanding its data centers and infrastructure to cater to the surging demand for AI services. In his recent shareholder letter, CEO Andy Jassy expressed optimism, revealing that AWS's AI revenue run rate reached $15 billion in the first quarter, with expectations for continued growth. During this quarter, Amazon further solidified its commitment to AI by investing in firms like OpenAI and Anthropic, both of which have pledged to utilize more of AWS's cloud computing resources over the coming years. Analysts from Stifel noted that these investments could lead to increased spending on AWS, raising questions about whether the current capital expenditure guidance will suffice to meet the anticipated demand. Despite ramping up its capital allocation for AI, Amazon is also undergoing workforce reductions, having announced the layoff of 16,000 employees at the start of the quarter, following a previous cut of 14,000. Additionally, investments in its emerging satellite internet service, Leo, are contributing to higher capital expenditures. The company aims to launch commercial services by mid-2026 and has recently proposed acquiring satellite operator Globalstar for approximately $11.57 billion, marking its second-largest acquisition to date. As of now, Amazon has successfully launched 270 satellites and plans to send another 32 into orbit shortly. While the company has requested an extension from the FCC regarding its satellite deployment timeline, it awaits a decision. Meanwhile, its primary competitor in the satellite internet sector, SpaceX, has urged the FCC to deny Amazon's request.