Ahead of Amazon's earnings, and following two blowout results from the first two giga-cap companies MSFT and META, UBS said that the "fast money seems to be short Amazon into the quarter on AWS and North America sales growth, with no upward revisions on the print." Meanwhile, the longer duration money "continues to like the story around AWS reacceleration, potential EBIT upside to Street, compelling valuation and potential AI theme around core ecommerce." In short, there was a tension between the short-term traders and long-term HODLers.

Judging by the kneejerk reaction to Q1 earnings just released, the short-termers were right, with the stock dumping after reporting mixed Q1 earnings but it was the guidance that was really disappointing. 

Here are the details:

So far so good (with some exceptions).

But what first caught the market's attention first was Amazon's AWS revenue, which came in just below estimates:

Turning to operating profits, here the results were uniformly solid:

As for fulfillment expenses, these came in slightly above estimates, while the seller unit mix was slightly worse than expected. These will likely rise quite a bit in a tariff regime:

Of the above, the most notable highlight - as per our preview - was AWS which grew revenue by 17% to $29.27BN, just below the sellside estimate of $29.36BN, and the first notable slowdown in the topline in two years.

Still, if revenue growth for AWS was a bit light, the record 39.5% margin more than offset it, beating estimates of 35.35%. Elsewhere, North American profit rose to $5.84 billion, resulting in a profit of 6.29%, if below the estimate of 6.65%. Meanwhile, international margins rose to 3.30% from 3.03%.

As a result of the jump in AWS profits, Amazon's consolidated operating margin continued to grow impressively and in Q1 grew for a 4th consecutive quarter to a new all time high of 11.8%.

However, while the above data was mixed if generally solid, it was the company's guidance that led to an after hours drop in the stock; that's because the company projected profit and revenue in the current quarter both of which were seen as coming in soft vs Wall Street expectations:

If accurate, that would mean that after revenue grew at the slowest pace since 2022 in Q1, the outlook sees revenue growth post a modest improvement, rising just over 9% in Q2.

But again, it was the subpar operating income forecast that was the big disappointment.

In response to the soft guidance and the disappointing AWS revenue growth, the stock initially pumped but then dumped...