**Amazon Erases 12% Gain, Turns Red After Revealing Sharp Slowdown In April AWS Growth**

Amazon Erases 12% Gain, Turns Red After Revealing Sharp Slowdown In April AWS Growth

**Update (6:00pm)**: Everything was going ok, with AMZN stock soaring as much as 12% and then suddenly AMZN stock erased all gains and turned red during the company's analyst earnings call (the media call held an hour earlier went by ok).

There was initially some confusion what sparked the plunge, but it eventually was revealed that during the call, Amazon said that “Customers continue to evaluate ways to optimize their cloud spending in response to these tough economic conditions in Q1 and we are seeing these optimizations continue into Q2 with **April revenue growth rates about 500bps lower than what we saw in Q1**."

As noted earlier (see below), AWS did a little better than analysts had expected in 1Q, but that might not be worth much if growth continues to drift toward single digits.

The company tried to provide some favorable spin with the CEO saying that he is "pretty optimistic that we have a chance not just to recover to where we were pre-pandemic in terms of operating margin, but I think there is additional upside with some of the opportunities we've identified" but by now it was too little too late, and the stock had erased all of its earlier gains and was on the verge of turning red for the day.

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With three out of five FAAMG stocks - which of course is now known as GAMMA ever since Facebook's ignominious rebranding to Meta (at least until the company  quietly changes its name to MetAI) - having already reported solid results helping push the market back into the green for the week, investors are keenly looking to Amazon earnings after the close today to (almost) round out the picture for the resurgent market generals while could set the tone for the rest of 2023... or at least until the Fed meeting next week.

As previewed earlier (https://www.zerohedge.com/markets/amzn-earnings-preview-here-are-main-things-look), Amazon is expected to post sales of $125 billion, up 7.1% from a year earlier. According to Bloomberg, analysts and investors will be watching for insights into consumer spending patterns, both in terms of confidence in the overall economy and with regard to how much they are spending online vs. in stores. Investors will also be watching to see how Amazon’s cloud computing business and advertising business are holding up.

Investors will also want to see signs that CEO Andy Jassy’s cost-cutting measures - which included cutting 27,000 corporate employees - are helping to slash expenses and boost profits. Amazon had 1.5 million employees at the end of 2022, mostly blue-collar workers in its warehouses. In addition to the corporate cuts, Amazon tends to trim its warehouse workforce after the holiday shopping season.

But by far the most important variable will be Amazon Web Services, which is expected to post sales growth of 14%, the slowest since Amazon began breaking out the cloud-computing division’s performance with data going back to 2014. **AWS almost always accounts for more operating income than the rest of Amazon’s businesses combined.** But the unit has been hit hard as businesses pare their technology spending. Among the biggest questions for Amazon during this year of cost cutting and layoffs is how low AWS’s growth might sink.

What about Artificial Intelligence, which has been the core theme of Microsoft, Google and Meta’s earnings calls so far this week. How will Amazon play it? The company’s shown its hand, to an extent, on how generative AI will boost their business. But the focus is on AWS and targeting cloud customers (rather than Amazon’s consumer-facing arms).

Finally, while Amazon stock has badly underperformed the rest of the GAMMA names, heading into today's earnings the stock gained and was on track to notch its biggest two-day jump since February. So far this year, the shares are up about 31%.

So with all that in mind, here is what Amazon just reported for its just concluded quarter

- Q1 EPS 31c,up from a 38c loss YoY, and _**beating**_ the estimate of $0.21

- Q1 Net sales $127.358 billion, +9.4% y/y, _**beating**_ the estimate of $124.7 billion

- Online stores net sales $51.10 billion vs. $51.13 billion y/y, _**beating**_ estimate $50.57 billion

- Physical Stores net sales $4.90 billion, +6.6% y/y, _**beating**_ estimate $4.77 billion

- Third- Party Seller Services net sales $29.82 billion, +18% y/y, _**beating**_ estimate $28.7 billion

- Subscription Services net sales $9.66 billion, +15% y/y, estimate $9.29 billion

- North America net sales $76.88 billion, +11% y/y, _**beating**_ estimate $75.5…

https://www.zerohedge.com/markets/amazon-soars-after-smashing-expectations-guiding-higher