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Analysts flag uncertainty for Amazon’s future growth after AWS commentary causes early gains to disappear.

Amazon (NASDAQ: AMZN) exceeded analysts’ expectations in its Q1 results on Thursday, thanks to growth in cloud and advertising. Despite rising 8% in after-hours trading, Amazon’s shares dropped nearly 2% in pre-market trading on Friday after management expressed caution on the earnings call regarding cloud growth.

CFO Brian Olsavsky stated that customers are finding ways to optimize their cloud spending in response to challenging economic conditions, leading to optimizations that have lowered revenue growth rates to 500 basis points lower than in Q1. In Q1, Amazon reported EPS of $0.31 on revenue of $127.4 billion, surpassing estimates of $0.21 on revenue of $124.55 billion. Net sales in North America rose 11% to $76.88 billion YoY in Q1.

Amazon Web Services, its fast-growing cloud revenue segment, grew 16% to $21.35 billion, while advertising revenue rose to $9.5 billion from $7.9 billion in the same period the previous year. For Q2, Amazon expects revenue of $127.0 billion to $133 billion and operating income of $2.0 billion to $5.5 billion, in line with market estimates for revenue of $129.9 billion. Despite short-term uncertainties regarding AWS growth, Wolfe Research raised its price target on Amazon stock to $140 per share, while William Blair analysts cautioned that the shares could trade sideways until Q2’s earnings report when investors receive intra-quarter AWS growth trends.

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