Amazon (AMZN) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, April 29, 2026 at 5:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Andrew R. Jassy
• Chief Financial Officer — Brian T. Olsavsky
• Director, Investor Relations — Dave Fildes

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RISKS

• Andrew R. Jassy said, "the cost of components, particularly memory, has skyrocketed," and warned of capacity constraints and supply volatility in the memory market that may impact capital expenditures and supply chain stability.
• Brian T. Olsavsky noted, "our guidance anticipates higher transportation costs related to fuel inflation," partially offset by a new FBA surcharge, indicating pressure on cost structure.
• Brian T. Olsavsky commented, "we do expect a year-over-year cost increase of approximately $1 billion related to Amazon LEO," tied to satellite manufacturing and launch costs, which will affect Q2 operating income.
• Andrew R. Jassy cautioned that rapid CapEx increases in periods of high AWS growth "the early years’ free cash flow" until new infrastructure is monetized.

TAKEAWAYS

• Total Revenue -- Amazon (NASDAQ:AMZN) reported $181.5 billion, increasing 17% year over year (15% excluding a $2.9 billion favorable foreign exchange impact).
• Operating Income -- $23.9 billion, resulting in a 13.1% company-wide operating margin, the highest ever reported.
• AWS Revenue -- $37.6 billion, up 28% year over year and $2 billion sequentially from Q4 2025, the largest Q4 to Q1 increase in AWS history.
• AWS Annualized Revenue Run Rate -- $150 billion, with AI services contributing over $15 billion in annualized revenue run rate in their first three years.
• AWS Backlog -- $364 billion as of Q1, explicitly not including over $100 billion from a new deal with Anthropic.
• Chips Business (Custom Silicon) -- Annual revenue run rate of $20 billion, with nearly 40% quarter-over-quarter growth; as a standalone, would represent a $50 billion run rate if chips produced this year were sold externally.
• Trainium Revenue Commitments -- Exceeds $225 billion, with Trainium2 chips providing ~30% better price performance than comparable GPUs and Trainium3 offering 30%-40% improvement over Trainium2; much of both chip generations already subscribed or reserved.
• Bedrock Customer Adoption -- Over 125,000 customers and nearly 80% of the Fortune 100 use Bedrock, with Q1 customer spend up 170% sequentially and total Q1 tokens processed exceeding all prior years combined.
• Graviton CPU Adoption -- Used by 98% of the top 1,000 EC2 customers, offering up to 40% better price performance than any other x86 processor.
• North America Segment Revenue -- $104.1 billion, up 12% year over year; operating income $8.3 billion, operating margin 7.9%.
• International Segment Revenue -- $39.8 billion, increasing 11% year over year on a constant currency basis; operating income $1.4 billion, margin 3.6%.
• Store Units Growth -- 15% year over year, highest since COVID lockdown period; perishable grocery sales grew over 40x year over year and now make up nine of top 10 most-ordered items for same-day delivery where available.
• Fulfillment Expense -- Grew 9% year over year (FX-neutral), with outbound shipping costs up 12% while overall unit growth outpaced these expenses.
• Same-Day or Overnight Delivery -- Over 1 billion items delivered in 2026 so far; over 90,000 items available for one- or three-hour delivery.
• Amazon Ads Revenue -- $17.2 billion, up 22% year over year, attributed to full-funnel offerings and expansion into partnerships with Netflix, Comcast, and Samsung.
• Prime Video -- Now a large and profitable business, described as a major driver of new Prime memberships and combining original, exclusive content and live sports rights.
• Q2 2026 Guidance -- Net sales projected between $194 billion and $199 billion, with a 10 basis point expected headwind from FX; operating income predicted at $20 billion to $24 billion.
• Cash Capital Expenditures -- $43.2 billion in Q1, primarily allocated to AWS and generative AI expansion.
• Major Customer and Partner Announcements -- New agreements since last call include: OpenAI, Anthropic, Meta, NVIDIA, Uber, U.S. Bank, Fox, Southwest Airlines, U.S. Army, Bloomberg, Cerebras, Fundamental, National Geographic Society, PGA Tour.
• Amazon LEO -- Over 250 satellites launched; commercial service on track for Q3 launch, with meaningful revenue commitments from Delta Air Lines, JetBlue, AT&T, Vodafone, DIRECTV Latin America, Australia’s National Broadband Network, DP World Tour, NASA, and an agreement for Apple device satellite service.

SUMMARY

The earnings call highlighted significant acceleration in AWS and AI-related businesses, marked by a $2 billion sequential AWS revenue increase, robust growth in custom silicon, and rapid adoption of new AI capabilities across AWS partners and customers. Management detailed a record $364 billion AWS backlog before factoring in the latest Anthropic deal, and provided forward-looking evidence of substantial capital deployment with expectations for continued near-term free cash flow constraints. Rising input costs for memory, greater fulfillment and transportation outlays, and material investment in satellite infrastructure were explicitly acknowledged as factors weighing on margins and capital intensity for the upcoming period.

• Andrew R. Jassy confirmed that nearly all next-generation Trainium chip supply is already allocated and that much of the following generation is pre-reserved, signaling sustained demand for Amazon's proprietary silicon.
• Prime Video was positioned as a now-profitable driver of Prime adoption, with content investment supporting both subscriber growth and advertising revenue diversification.
• Bedrock AI platform enhancements, including the onboarding of OpenAI models and launch of managed stateful agents, were described as unique "big deal" for customer adoption and competitive differentiation.
• Management identified accelerating enterprise cloud migrations spurred by hardware supply shocks, with preference shifting toward hyperscale cloud providers for component supply stability.
• Fulfillment automation was cited as delivering early productivity gains, with planned deployment of next-generation robotics in all upcoming U.S. fulfillment centers in 2026.
• Advertising momentum was specifically attributed to agentic commerce and AI-driven ad creative tools, with upward trends in small- and medium-business participation.
• Jassy stated, "the backlog for Q1 is $364 billion. That does not include the recent deal that we announced with Anthropic for over $100 billion."

INDUSTRY GLOSSARY

• AWS: Amazon Web Services, Amazon's cloud computing and infrastructure-as-a-service segment.
• Trainium: Amazon-designed semiconductor optimized for AI model training workloads in AWS data centers.
• Bedrock: AWS’s managed service enabling customers to build and deploy generative AI applications with various foundation models.
• Agentic AI: AI systems capable of autonomous, multi-step actions such as workflow automation or purchasing on behalf of users.
• Amazon LEO: Amazon’s low-Earth orbit satellite network, designed to provide global broadband connectivity services and direct-to-device satellite offerings.
• FBA: Fulfillment by Amazon, a logistics program where Amazon handles storage, shipping, and customer service for sellers.
• Quro/Transform/Connect/Qwik: AWS-branded turnkey agentic AI products for code, business operations, and workflow automation.

Full Conference Call Transcript

Dave Fildes: Hello, and welcome to our Q1 2026 financial results conference call. Joining us today to answer your questions are Andrew R. Jassy, our CEO, and Brian T. Olsavsky, our CFO. 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, 04/29/2026 only, and will include forward-looking statements. Actual results may differ materially.

Additional information about factors that could potentially impact our financials is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-Ks 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 have 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 do not have any additional business acquisitions, restructurings, or legal settlements.

It is not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now I will turn the call over to Andy.

Andrew R. Jassy: Thanks, Dave. We are 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.com, Inc. 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 is very unusual for a business to grow this fast on a base this large, and the last time we saw growth at this clip, AWS was roughly half the size.

We have never seen a technology grow as rapidly as AI. Amazon is already a leader, and 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 260 times larger. There are several reasons customers are choosing AWS for AI. First, we have 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, and Bedrock, which saw 170% growth in customer spend quarter over quarter and processed more tokens in Q1 than all prior years combined. We are 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 enables any organization to build generative AI 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 are already seeing unprecedented demand for this new product, and we are 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 Quro, Transform, Connect, and Qwik, and they continue to resonate with customers.

The number of developers using Quro more than doubled quarter over quarter, and enterprise customer usage increased nearly 10x. Customers have used Transform to save over 1.56 million hours of manual effort when migrating and modernizing their workloads. The number of new customers using Qwik has grown more than 4x quarter over quarter, and we just announced v1 of our Qwik desktop app yesterday. It is 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, and create agents that highlight or automatically do work that you used to have to do yourself.

You can easily keep refining your preferences, and Qwik’s advanced knowledge graph enables its AI agents to automatically learn from you to become more personalized over time. One of our enterprise customers just told us, “Qwik is not just improving how we work. It is letting us reimagine it.” Second, and 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, and they are choosing AWS because we have 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, and 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, and just since last quarter’s call, we have 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, but 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 have gotten here is extraordinary, and we have momentum.

For our custom AI silicon, we have recently shared very large multiyear, 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, and 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 in 2026 and is 30% to 40% more price performant than Trainium2, is nearly fully subscribed, and 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. Almost 80% of the Fortune 100 companies are using Bedrock. We also just announced that Meta is committed to using tens of millions of 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, 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 falls heavily on CPUs. That is why Meta chose Graviton, which delivers up to 40% better price performance than any other x86 processors, and is 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 are unusually well positioned for this AI inflection. We are in the early stages of the experience. While the largest number of AI chips we are bringing in are Trainium, we continue to have a deep partnership with NVIDIA.

We have immense respect for them, continue to order substantial quantities, will be partners for as long as I can foresee, and we will always have customers who want to run NVIDIA on AWS. And we will also have a very large chips business ourselves. Customers always want choice. It has 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, at 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 other chips for inference.

Finally, we continue to be confident in the long-term CapEx investments we are 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 have been sharing, the faster AWS grows, the more short-term CapEx we will spend. AWS is 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-plus 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 of years after being in service. However, in times of very high growth like now, where the CapEx growth meaningfully outpaces the revenue growth, the early years’ free cash flow is challenged until these initial tranches of capacity are being monetized and revenue growth outpaces CapEx growth. We have been through this cycle with the first big AWS growth wave, and we like the results.

We expect to feel similarly about this next wave with much larger potential downstream revenue and free cash flow. I will now turn to Stores. Units grew 15% year over year, the highest we have seen since the tail end of COVID lockdowns. We continued expanding selection, including more than 600 new notable brands. Our grocery business continues to grow quickly across both perishables and nonperishables, and with more than $150 billion in gross sales in 2025, we are now the second-largest grocer in the U.S. We offer perishables delivered same day alongside millions of other items in more than 2,300 cities and towns across the U.S., with more to come.

Prime members are loving the convenience of getting fresh groceries alongside other products they are buying in Amazon, and perishable sales have grown over 40x year over year and make up nine of the top 10 most ordered items for same-day delivery where the service is available. Customers shopping same-day perishables build larger baskets, adding nearly 3x as many items to their order and spending over 80% more than customers who do not. Whole Foods Market also continues to accelerate with over 550 stores today and 100 more coming in the next few years. We remain committed to meeting or beating other retailers on price.

In Q1, the average prices of products offered on Amazon.com, Inc. decreased compared to the same period last year. Prime Day will take place in most countries in June, which will bring Prime members even more savings across every category. We continue to find new ways to speed up delivery for customers in both cities and rural areas. We offer millions of items available for same-day delivery with Prime—up to 40x the selection of a typical big-box retail store—and we have delivered more than 1 billion items same day or overnight so far this year.

We are also making delivery even faster, recently announcing one- and three-hour delivery options on over 90,000 items, with one-hour delivery available in hundreds of cities and towns, three-hour delivery in 2,000-plus cities and towns, more on the way. And we continue to expand our ultrafast delivery service, Amazon Now, which offers delivery in 30 minutes or less on thousands of items. It started last year in India, where orders are increasing 25% month over month, with Prime members tripling their shopping frequency once they start using it. The service is now available to tens of millions of customers across nine countries, with more to come as well.

The Stores team also continues to innovate and deliver for customers with AI. We launched Health AI, a 24x7 AI-powered personal health agent backed by One Medical clinicians that gives U.S. customers instant clinical guidance and takes action with their permission—from booking appointments to managing prescriptions to facilitating medical treatment with a real One Medical provider. Rufus, our agentic AI shopping assistant, continues to resonate with customers. Rufus can research products, track prices, and auto-buy products in our store when they reach a set price. Monthly active users are up over 115% and engagement is up nearly 400% year over year.

And we recently introduced a new AI experience for sellers in Seller Central that dynamically generates a custom, personalized visualization of data, key insights, and scenarios tailored to the seller’s goals. It is early, but the initial response and feedback are very strong. Moving on to Amazon Ads. We continue working to be the best place for brands of all sizes to grow their businesses, and we are pleased with the continued strong growth across our full-funnel offerings, generating $17.2 billion of revenue in the quarter and up 22% year over year. Forrester recently recognized Amazon as a leader in omnichannel advertising platforms, with unmatched supply and insights for connected TV and commerce media.

We deepened our Netflix partnership with Amazon Audiences, which enables advertisers to apply Amazon’s exclusive signals from shopping, browsing, and streaming to Netflix’s highly engaged viewers to reach the right audiences and drive even stronger performance. We also partner with Comcast to expand local advertising to thousands of brands, and expanded interactive video ad capabilities to partners starting with Samsung TVs. Our Ads team also continues to invent and deliver for advertisers with AI. For example, we expanded CreativeAgent—an agentic partner that plans and executes the entire ad creative process—to Canada, France, Germany, India, Italy, Spain, and the UK.

And we recently introduced sponsored product and brand prompts in Rufus to help brands showcase products and customers make more informed buying decisions. It is early, but we are seeing nearly 20% of shoppers who interact with a brand prompt in Rufus continue the conversation about that brand. We are also continuing to invent and see momentum in several other areas; I will mention a few. Starting with Entertainment, moviegoers have flocked to Project Hail Mary, with nearly $615 million in global box office to date. Its opening weekend was the second biggest for any non-sequel, non-franchise film in the last decade.

We also surpassed 100 million viewers globally for The Culprits movie trilogy, with all three films reaching number one in more than 170 countries at launch. In live sports, we offered exclusive coverage of the NBA SoFi Play-In Tournament, with total viewership up 18% compared to last year on cable. Alexa Plus early access expanded to millions more Prime members in Mexico, the UK, Italy, and Spain. Customers are loving Alexa Plus, talking to Alexa twice as much and for longer durations across a wider breadth of topics, completing purchases on devices 3x more, streaming music 25% more, and using smart home functionality 50% more than Alexa Classic.

Zoox has now driven nearly 2 million miles and carried more than 350,000 riders, is available to the public in Las Vegas and San Francisco, and is testing in eight other cities. We recently announced that Zoox will be available through the Uber app in Las Vegas and in Los Angeles in the future. And finally, Amazon LEO continues gaining momentum, with commercial service on track to launch in a few months. We already have meaningful revenue commitments from enterprises and governments including Delta Air Lines, JetBlue, AT&T, Vodafone, DIRECTV Latin America, Australia’s National Broadband Network, DP World Tour, NASA, and others.

We also announced that we plan to acquire Globalstar, which will expand LEO’s satellite network with direct-to-device capabilities, and we entered an agreement with Apple for Amazon LEO to power satellite services for iPhones and Apple Watches. We are in the middle of some of the biggest inflections of our lifetime, and Amazon.com, Inc. has the culture, the know-how, and the resources to make so many customers’ lives better and easier, and to build multiple new long-term businesses with substantial return on invested capital and free cash flow. We will continue investing and inventing to make it so. With that, I will turn it over to Brian.

Brian T. Olsavsky: Thanks, Andy. Let us start with our top line financial results. Worldwide revenue was $181.5 billion, a 15% increase year over year excluding the 180 basis point 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 have recently lowered seller fees. We are 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 and 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. Now let us 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 of 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 are 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 are 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 are seeing early positive results with improved site safety, higher productivity, and lower cost to serve. Moving to our AWS segment, revenue was $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 are 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 Trainium2’s token throughput. A consistent 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.

Now 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 will 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 will 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 will mention a few items on the operating income guidance. First, this assessment 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, and we expect to begin capitalizing certain costs in Q4. Amazon LEO’s commercial service is on track to launch in Q3, 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 am 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 us move on to your questions. Thank you.

Operator: At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question. Thank you. If you would like to ask a question, please press star 1 on your keypad. We ask that when you pose your question, you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please press star then 1 on your touch-tone telephone at this time. Please hold while we poll for questions. The first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Eric Sheridan: Andy, across an array of announcements you have made recently with AWS and reflecting upon what you wrote in the shareholder letter, can you talk a little bit about the needed levels of investment over the next couple of years to scale compute and capacity to meet your current state of revenue backlog, and how we should be thinking about your unique approach to custom silicon and AI infrastructure that maybe positions you competitively to build that scale? Thanks so much.

Andrew R. Jassy: Yeah. Well, to your point, Eric, we have made a lot over the last several months, and we are really pleased with the growth that we are seeing in AWS right now. You know, 28% year over year, fastest growth rate in 15 quarters for us, we have not grown at this pace since we were about half the size, and growing 28% on a $150 billion annual run rate basis is not simple to do. And I think there are a few things around it.

First is we continue to see people choosing AWS for AI, in part because of our really broad full-stack functionality, in part because people want their inference as they scale it to be close to their data and their applications—so much more of it lives in AWS than elsewhere—and in part because we have the strongest security and operational performance, and that is just what you can see in our numbers. It is leading to very substantial AI growth. And then, at the same time, we are seeing very significant growth in our core business.

Some of that is the migrations that have picked up from enterprises from on-premises to the cloud, but a lot of that is also as AI growth is exploding, it turns out that it leads to a lot of core growth as well—all the post-training, all the reinforcement learning, all the agentic actions and tool usage that these agents are using.

And it fits with what you are asking about on the chip side, which is because we have an unusual collection of chips—we have the leading CPU chip in Graviton, and we have the leading price-performance AI silicon chip in Trainium—it means that we are unusually well positioned for the inflection that we are seeing and the type of growth that we are experiencing. So I do not have a new update on capital.

Our plan is largely the same, but we do view this as truly a once-in-a-lifetime opportunity where every application that we know of is going to be reinvented, and there are so many new applications that none of us have ever imagined or dreamed we could build that are starting to be built and will be built, and all of that is going to be built on top of AI with a lot of consumption of CPUs and core as well.

So I expect that we will invest a significant amount of capital over coming years to pursue that opportunity, and that our customers, our shareholders, and Amazon.com, Inc. in general are going to be much better off down the road because we did so.

Operator: And the next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question.

Brian Nowak: Great. Thanks for taking my questions. I have two. One is on the accounting side—I will probably get it in the queue—but can you just give us an update on what the AWS backlog looks like and any visibility on the breadth of that backlog beyond the big labs? That is the first one. And then the second one, as you think about milestones for Rufus and agentic commerce for you in 2026, what are you most focused on making sure you accomplish on the agentic side this year just to make sure you stay at the knife’s edge of the agentic commerce offerings? Thanks.

Andrew R. Jassy: Yeah. On the backlog, the backlog for Q1 is $364 billion. That does not include the recent deal that we announced with Anthropic for over $100 billion. There is reasonable breadth in that as well—it is not just one customer or two customers. On the agent commerce milestone question, we are very bullish on what agentic commerce will look like. I think it is going to be very good for customers in the long term. I think it will be good for us too. And you can see some of that focus from us in what we are building with Rufus.

If you have not checked out Rufus in a while, it has really substantially improved over the last year, and we have a lot of customers using it. As I mentioned earlier, you see the monthly active users up over 115% and engagement up 400% year over year. While I think we will do a lot of work with third-party horizontal agents to try and make that customer experience better—and by the way, I do think today it reminds me in some ways of what we saw in the early days of search engines and their trying to refer business to e-commerce—it has never been a giant part of the referrals to our e-commerce business.

But over the years, the experience got better. And what you see with agentic commerce is it is a small fraction of what we see with the search engine referrals, but the experience just has not gotten great with these third-party horizontal agents yet. They are not often able to get the pricing right or the product information right. They do not have any personalization data or any shopping history. So we do want to see that get better with third-party horizontal agents. We are having conversations with all those folks to try and make that better and find something that works for customers and all the companies. It will be interesting over time which agents customers choose to use.

I happen to think that if you are going to a particular retailer that you would like to do business with, you would like to shop from, if they have a great agentic shopping assistant, you are going to often start there because it is where you are doing your shopping. It is easier—they have better product information, they have better information about what others like you are buying, and you can make all sorts of changes to how your account and your shipping information is working there. That is what we are aiming to make Rufus be—we are aiming to have it be the best shopping assistant anywhere, and I think we are on that path.

Operator: Thank you. The next question comes from the line of Justin Post with Bank of America. Please proceed with your question.

Justin Post: Thank you. I would like to ask two, one on models and then one on premium chips. So on models, it looks like you might have access to the full suite of OpenAI models on Bedrock. Just wondering how big of an unlock that is and how focused you are on your own Novo model. And then second, the shareholder letter mentioned you might be able to sell racks of Trainium. Just wondering, with your capacity constraints, how are you thinking about timing of that and how big of an opportunity? Thank you.

Andrew R. Jassy: Yeah. On the models question, I think the fact that we are going to have all the OpenAI models available in Bedrock is a big deal. It is a big deal for customers. We obviously have a very large amount of AI being done in Bedrock today on the models we have—this is Anthropic, Llama, Mistral, and a host of others. But the one thing you learn over and over again with every technology—it was true in databases, it was true in analytics, it is true in models, it is true in chips too, by the way—is that customers want choice. There is not one tool to rule the world, and they want choice.

Each of the models are better at some things than other models. People for a long time have wanted to consume OpenAI models in Bedrock. We just enabled yesterday the stateless model, the 5.4 model, and we will enable the most recent 5.5 model in the next couple of weeks. Most of the model work and most of the AI has been done in these stateless models—tokens in and tokens out. While I think there will continue to be a lot of work done that way, I think the future of using these models is a stateful model, a stateful API.

That is because when you are building agents, you are building AI applications, you do not want to start anew every time you interact with the model. You want to store state. You want to store identity. You want to store what the conversation or the actions have been. You want to reach out and do a little bit of compute here. You want to have the models reach out to different tools to accomplish different tasks. That only happens if you are able to store state.

The Bedrock managed agents that we collaborated with and invented with OpenAI that we just announced the preview of yesterday is also—I think that is the future of how these agents are going to be built. It is something that nobody else has, and I think it is very exciting to our customers. Of course, we will have other models like Codex and things like that as well. So I think it is a big deal for customers, and I think it is going to be good for our business as well. On the question about Trainium and the notion of our selling racks over time, I do think that is very much a possibility.

Always, we have to balance—we have such demand right now for Trainium, and we have such demand from various companies who will consume as much as we make—that we have to decide how much we are going to allocate to the existing demand and customers, how much we are going to save to sell as racks, and for our existing customers that we sell Trainium to, how many will be Trainium plus running on our cloud infrastructure versus just the chips themselves. But I expect over time there is a good chance we are going to sell racks in the next couple of years.

Operator: And the next question comes from the line of Rob Sanderson with Loop Capital Markets. Please proceed with your question.

Rob Sanderson: Yes, thank you. Good afternoon, and thanks for taking the question. I wanted to ask a little bit about Amazon LEO. Can you maybe help dimensionalize some of the revenue opportunity in the consumer and in the enterprise space over the next few years? What are the governors on the ramp? Could you talk about types of new services that you will be able to develop with the Globalstar infrastructure and the spectrum that maybe you could not address before or would take you—maybe you can get to more quickly now? And then, how expansive is the longer-term vision?

I know you are just beginning to launch commercial services, but over the long term, do you expect to include non-communication services like orbital data centers or things like that as this becomes feasible in the decade ahead?

Andrew R. Jassy: Yeah. I will try and address as many of those questions as I can. I am very bullish about Amazon LEO and the opportunity there. There are billions of people around the world who do not have access to broadband connectivity, and there are many thousands of businesses and government assets that people do not have visibility to because they do not have the right connectivity. It means those entities cannot do a lot of the things that we all take for granted today, including education online, business online, shopping or entertainment online, having constant visibility and digital twins. There are all these things that they cannot do today.

We think that Amazon LEO is going to help solve that problem. When we launch our service commercially—we just had another launch this week, so we have over 250 satellites in space—when we launch that service commercially, it will be one of two offerings that are on the current technology edge, and I think that we will have meaningful advantage in performance. I think we will be about 2x better on the downlink than existing alternatives and about 6x better on the uplink performance than existing alternatives. I think we will have a cost advantage for customers.

For the governments and the enterprises—and we talk to a lot of them, and we have already signed agreements with many of them even though we have not launched the service commercially, the latest of which was with Delta Air Lines committing at least half of their fleet starting in 2028—when you talk to them, another really big part of what matters to them is they are going to want to take data off of the satellite constellation, they are going to want to store it in the cloud, they are going to want to do analytics on it, and they are going to want to do AI on it.

Just the combination of LEO with the leading cloud in the world in AWS is very compelling to enterprises and to government. Today, if you ask what stops us from growing the business, we have to get the constellation into space. We have over 20 launches planned this year. We have over 30 launches planned in 2027. I think the business has a chance to be a very large, many-billion-dollar revenue business, and it has some characteristics that are reminiscent of AWS in that it is capital intensive upfront, where you are committing a lot of capital and cash in the early years for assets that you get to leverage over a long period of time.

I like the free cash flow and return on invested capital characteristics of that business in the medium to long term. On your question about Globalstar, increasingly what we are finding with consumers, enterprises, and governments is that they do not like to have any periods where they do not have connectivity—it just upsets whatever customer experience they are going through. Even in metropolitan areas, we all hit certain parts of the highway or certain roads where you cannot get connectivity, or you are hiking, you are skiing. Increasingly, we see very large demand for consumers to have direct-to-device, and that was really the impetus for our acquisition of Globalstar.

They have unusual and scarce global spectrum that is required to provide direct-to-device. We also really like the satellite know-how that we will get as part of that merger with Globalstar, and it also afforded us the opportunity to build a deep relationship with Apple, who is going to use our direct-to-device for their iPhones and for their Watches. So very optimistic about the business.

Operator: And the next question comes from the line of Shweta Khajuria with Wolfe Research. Please proceed with your question.

Shweta Khajuria: Thanks a lot for taking my questions. I wonder, Andy, if you could please talk about how you are thinking about the increase in price for memory and storage and just the supply chain inflation we are seeing and the impact it could have on CapEx this year and potentially next year as well. And then on agentic commerce, if you could talk about how you view the opportunity with advertising. I have no doubt that Rufus could be the best shopping assistant available over time, but for the advertising opportunity, do you view that if agents would be the ones taking action to shop?

Andrew R. Jassy: On memory and storage and the supply chain, I think everybody knows that the cost of components, particularly memory, has skyrocketed. We are in a stage where there is just not enough capacity for the amount of demand. We have worked very closely with our strategic partners. We saw this trend happening early, in the middle to latter part of last year, and we have worked with our strategic suppliers to get a significant amount of supply. We are working very closely with them. I think the team has been very scrappy. I think we have done a good job in making sure that we are not capacity constrained there, but we will watch that very closely.

One of the interesting things that we see right now with the change in price and supply on things like memory is that it is a further impetus pushing companies who have on-premises infrastructure into the cloud. A meaningful part of these suppliers are prioritizing their very largest customers, which cloud providers are. We have seen a number of conversations we have been having with enterprises for many months—where it has just been slower in getting the transformation plan to move to the cloud—accelerate rapidly just because we have a lot more supply than what others have. It will be interesting to see how that evolves over time.

We are doing our best to have the supply we need and keep the cost in the right spot, but we will see how that continues to evolve. On agentic commerce and how that impacts advertising, I actually believe that we are going to like this for advertising. I think it is going to be good for customers and good for our business. First, the way that our Ads team has built tools and agents themselves is making it so much easier to do advertising.

If you look at small and medium-sized businesses that had to take weeks and months to do creative and to pick the right audience, all that is so much faster and so much easier because of our advertising agentic tools, and you no longer have to take as much time or spend as much money building the creative. I think there are going to be a lot more advertisers with the rise of what is happening in AI.

If you look at the agentic commerce experience, these agentic experiences tend to be multi-turn conversations where you are not interacting with one search and getting an answer—you tend to find that you are asking questions, you are narrowing questions, and it is asking you questions on what you want. In that process of having multi-turns, there are multiple opportunities to surface relevant products to customers, many of which will be organic and some of which will be sponsored. It also gives rise to opportunities like sponsored prompts.

One of the interesting things that has been very successful for customers in our store has been when they ask certain questions, we give them a number of suggestions that are all created through AI, and we have gotten pretty good at also having sponsored prompts in that mix of questions and prompts that make it easy for people to keep digging deeper into what they are interested in. I believe that advertising will do well in a world of agentic commerce.

Operator: Thank you. And our final question comes from the line of Colin Sebastian with Baird. Please proceed with your question.

Colin Sebastian: Thanks very much. Good afternoon. Maybe a two-parter, if I could. Andy, first off, just wondering what you are seeing in terms of the trend between incremental AI demand from earlier adopters and larger AWS customers versus how the demand curve is shaping up across the broader enterprise base. And then at a high level, if you think about the use of AI internally across Amazon’s businesses—presumably the business overall looks very different in three or four years—maybe, Andy, if you could contextualize where you see the most opportunity for the technology internally, both in terms of product as well as driving more operating efficiency, I think that would be helpful. Thank you.

Andrew R. Jassy: Yeah. On what we see in the incremental AI demand from early adopters versus the broader enterprise base, I think it is no secret that the AI labs are spending an incredible amount of money on compute at this point, and compute both on the AI side as well as on the core side. The models that they are building and the companies that have successful generative AI applications are certainly spending a lot. There are several of those labs, but we also see quite a bit of enterprise adoption and usage of AI.

As I have said before, the largest absolute place that we see enterprises having success is in projects that are around cost avoidance and productivity—things like business process automation or fraud or things of that sort. But the number of projects that we are working with across enterprises, and that we are now starting to see come to production around brand-new experiences, trying to figure out how to reinvent their current experiences using inference and AI to be smarter, is also very significant. We are seeing the adoption in both of those segments.

On the use of AI internally for our current businesses, the shortest summary I could give you, Colin, is that I do not see a place in any of our businesses or any of the ways that we do work where we are not going to have giant impact from what we do. I have long had this belief that while you can add incrementally to a lot of your existing customer experiences with different agentic and AI experiences, in the fullness of time—and I do not know if that is three years from now or five years from now, or it could be sooner too—all these customer experiences we know are going to be completely reinvented.

They are going to have different interfaces. They are going to have different ways that people interact with them. People are going to want to have dialogue with them. It means that if you have an existing business that is doing well, you still have to look at every single one of your customer experiences and be able to carve off resource for that team to think anew about what the future customer experience would look like if you started from scratch today and if you had all the technologies like AI available to you when you start. That is what we are doing in every single one of our experiences.

I have a chance to be involved in some of those, and it is really exciting. There are experiences that may take a while for customers to get used to and to use over time. You might find different segments like those AI-forward experiences more than others early on, but if you are not actually working on inventing those right now, I think it is going to be very hard to have the business and the experience leadership that we want over a long period of time. So every single one of our consumer businesses, every single one of our businesses in general, is working on that.

Internally, I also think that it is going to radically change how we work—it already is. Just look at how agentic coding is changing how we are all building products. I think it is going to have a comparable impact on how we do DevOps, how we do customer service, how we do research, how we do analytics, how sales is conducted. I think every single one of these functions that we all do at work are going to very significantly change. That is another area of real focus for us. We have this experience I mentioned in my letter.

If you look at one of our services, we swapped out the engine of the service while we were also running the service full tilt. Normally, that would have taken 40 or 50 people about a year to do. We took five really smart, AI-forward-thinking people building on agentic coding tools, and those five people rebuilt it in 65 days. That is a very different world of operating. That is the world I think we are heading to over the next few years.

Dave Fildes: Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least three months. We appreciate your interest in Amazon.com, Inc. and look forward to talking with you again next quarter.

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