Amazon's 2026 first-quarter earnings call revealed a robust financial performance, with CEO Andy Jassy describing the current period as a "once-in-a-lifetime opportunity" for the company. A key highlight was the disclosure of the scale of its custom chip business, which, if operated as a standalone entity, would generate an annualized revenue of $50 billion.
The company reported total Q1 revenue of $181.5 billion, a 17% year-over-year increase. Operating profit reached $23.9 billion, resulting in a record-high operating margin of 13.1%. This significant profitability is being channeled into future investments, with cash capital expenditures for the quarter amounting to $43.2 billion. Jassy expressed strong confidence in these investments, stating that every application is poised for reinvention due to AI.
The cloud division, Amazon Web Services (AWS), was a standout performer. AWS revenue grew 28% year-over-year to $37.6 billion, marking its fastest growth rate in 15 quarters. The service now boasts an annualized revenue run rate of $150 billion. Jassy emphasized the unprecedented growth of AI, noting that AWS's AI-related annualized revenue surpassed $15 billion in the first three years of the current AI wave, compared to $58 million for AWS as a whole in its first three years.
A significant indicator of future growth is AWS's backlog of committed orders, which reached $364 billion at the end of Q1. This figure does not include a recent multi-year agreement with Anthropic valued at over $100 billion. Jassy noted that this backlog is diverse and not concentrated with just a few large clients. AI-related revenue maintained triple-digit growth, and the Bedrock platform processed more tokens in Q1 than in all previous years combined.
For the first time, Amazon systematically disclosed the scale of its custom silicon business. The chip division grew nearly 40% sequentially in Q1, achieving an annualized run rate exceeding $20 billion. Jassy revealed that if this business sold its chips to both AWS and third parties like other leading chip companies, its annualized revenue would be $50 billion, positioning it among the top three data center chip businesses globally.
Progress on the Trainium AI chip series was detailed: Trainium 2 offers approximately 30% better price-performance than comparable GPUs and is largely sold out; Trainium 3 began shipping in early 2026 with 30-40% better price-performance than its predecessor and is almost fully booked; Trainium 4 is about 18 months from volume availability, but most capacity is already reserved. Cumulative revenue commitments for Trainium have surpassed $225 billion, including major, multi-gigawatt commitments from Anthropic and OpenAI.
Jassy highlighted the strategic value of these chips, stating they are expected to save Amazon "tens of billions of dollars" in annual capital expenditures and provide a several-hundred basis point operating margin advantage in inference workloads compared to relying on others' chips. He reaffirmed Amazon's long-term partnership with NVIDIA, stating they continue to order significant quantities of its products while also building a substantial internal chip business.
A key theme of the call was the shift towards "Agentic" AI, where AI agents reshape applications and commerce. Jassy asserted that most enterprise value from AI will be realized through agents. The AI shopping assistant, Rufus, saw monthly active users grow over 115% year-over-year, with engagement soaring nearly 400%. Internally, AI is driving significant efficiency gains; Jassy shared an example where a service engine rebuild that typically takes a large team a year was completed by five people using AI agent coding tools in just 65 days.
Beyond AI, the low-earth orbit satellite project, Amazon Leo, is seen as a major future growth driver. Commercial service is planned for Q3 2026. The company has already launched over 250 satellites and acquired GlobalStar to secure scarce global spectrum for direct-to-device services, including a recently announced deal to provide satellite services for Apple's iPhone and Apple Watch.
In retail, unit growth accelerated to 15%, the highest rate since the end of COVID-19 lockdowns. The grocery business, with over $150 billion in gross sales in 2025, has made Amazon the second-largest grocery retailer in the US. Advertising revenue grew 22% to $17.2 billion.
Looking ahead, CFO Brian Olsavsky provided Q2 2026 guidance, forecasting net sales between $194 billion and $199 billion and operating income between $20 billion and $24 billion. The guidance includes an estimated $1 billion cost increase in the North America segment related to the manufacturing and launch of Amazon Leo satellites.
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