Amazon earnings summary (AMZN): Q1 GAAP EPS of $0.31 beat expectations by $0.11. Revenue of $127.4B (+9.5% YoY) beat estimates by $2.85 billion. North America segment sales increased 11% YoY to $76.9 billion. However, international segment sales increased just 1% YoY to $29.1 billion, or increased 9% excluding changes in foreign exchange rates. AWS segment sales dropped 16% YoY to $21.4 billion.

For the first time in history, AWS' QoQ sales profoundly fell. In fact, Azure's 31% growth in constant currency terms, followed by competitor Alphabet Cloud's 28% growth and Amazon's AWS' 16% growth, stunned investors. Alexa still has a few years to figure out a viable business model before facing serious layoffs. Amazon, on the other hand, saw a 23% Yo increase in advertising in the retail space.

All in all, in Q1 2023, Amazon reported operating income of $4.8 billion, above the upper end of its guidance range. These operating results were negatively impacted by estimated employee severance payments of approximately $470 million in Q1, including $270 million related to AWS. Although previously investors were more than willing to pay 60-plus times forward EPS, assuming AWS continues to grow rapidly with its sky-high operating margins, now there’s good reason to review this enthusiasm. AMZN may be losing its luster as AWS fails to deliver in an economy-wide reduction in IT spending.