Amazon Earnings: E-Commerce and Advertising Drive Good Quarter While AWS Decelerates Further

Wide-moat Amazon reported good first-quarter results and provided guidance for the second quarter that was better than we were anticipating. E-commerce was solid and advertising was resilient, and we applaud the operational improvements that drove higher margins, while on the downside, Amazon Web Services continues to decelerate. We still envision healthy long-term growth driven by e-commerce proliferation, AWS, and advertising even as the near term remains a bit of a work in progress. Further, macroeconomic issues are sending mixed signals, with pressure in the U.S. and improving conditions in Europe. We are maintaining our fair value estimate of $137 per share and still view shares as attractive.