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Amazon (AMZN) is trading slightly lower after reporting solid Q1 earnings last night. AMZN reported its fourth consecutive $0.20+ EPS beat, but Q1 was the smallest upside of that timeframe. Revenue rose 8.6% yr/yr to $155.7 bln, which was in-line. This was AMZN's first single-digit yr/yr revenue increase since 1Q23, which has seen only double-digits since then. However, it was 10% growth constant currency (CC).

• Amazon does not guide for EPS, but does for operating income. As such, this is an important metric, especially the guidance. Q1 operating income grew 20% yr/yr to $18.4 bln, above prior guidance of $14-18 bln. However, the Q2 guidance of $13.0-17.5 bln is being seen as a bit soft relative to street estimates.
• Let's start with the Stores segment. AMZN saw growth of +8% CC in North America and +8% CC in its international segment. That is lower than recent quarters, but not surprising on an increasingly larger base. In order to appeal to value-conscious consumers these days, AMZN held deal events worldwide in Q1 across the Big Spring sale in the US and Canada, spring deal days in Europe, and Ramadan Eid sale. It will hold a Prime Day event in July.
• Regarding tariffs, AMZN has not yet seen any attenuation of demand. To some extent, it has seen heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact.
• Amazon AWS segment sales rose 16.9% yr/yr to $29.27 bln with growth in both its generative AI business and non-generative AI offerings as companies turned their attention to newer initiatives, bring more workloads to the cloud etc. AMZN noted that more than 85% of global IT spend is still on premises but that equation should flip in the next 10-20 years.
• Turning to Advertising Services, segment revenue grew +19% CC to $13.92 bln. This was a slight reprieve from the downward trend from recent quarters: +18% CC in Q4, +19% CC in Q3, +20% CC in Q2, +24% CC in Q1. However, this segment's base is getting larger. Advertising remains an important contributor to profitability in the North America and International segments.

Overall, this was a solid but not spectacular report from Amazon, about what most expected. We think investors are pleased to hear AMZN is not yet seeing much impact from tariffs. Consumers are still buying items at a good clip, but that could change if prices rise. The main negative was the Q2 operating income guidance being a bit light.