Amazon’s cloud business is surging — and so is its capital spending
Source: TechCrunch
Amazon was one of several tech giants that on Wednesday beat Wall Street’s first‑quarter earnings expectations, offering more financial evidence that the AI boom continues to reward companies that supply the picks and shovels.
AWS growth
Amazon Web Services, buoyed by its role in fueling the AI boom, saw net sales increase 28% year‑over‑year to $37.6 billion, the fastest growth rate for AWS in 15 quarters, Amazon president and CEO Andy Jassy said during the earnings call.
“It’s very unusual for business to grow this fast on a base this large. The last time we saw growth at this clip, AWS was roughly half the size. We’ve never seen a technology grow as rapidly as AI. Amazon is already a leader, and companies continue to choose AWS for AI.”
Jassy compared the current AI‑driven growth to AWS’s early days: three years after launch, AWS had a $58 million revenue run rate; during the first three years of the AI wave, its AI revenue run rate is over $15 billion—nearly 260 times larger.
Capital expenditure
Even as money flows into its cloud business, Amazon is committing increasingly large capital outlays to build the supporting infrastructure. Jassy said the growth in capital expenditure (capex) will continue in the near term:
“The faster AWS grows, the more short‑term capex we’ll spend. AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear, in advance of when we can monetize it.”
He positioned these investments as short‑term cash burn for a long‑term payoff, noting that assets such as data centers have lifespans of more than 30 years, while chips, servers, and networking gear are useful for five to six years.
Financial impact
The first‑quarter earnings report shows the pull on free cash flow. Free cash flow fell to $1.2 billion for the trailing twelve months, driven primarily by a $59.3 billion year‑over‑year increase in purchases of property and equipment—much of it related to AI. This represents a 95 % drop from the $25.9 billion free cash flow reported in Q1 2025.
“In times of very high growth like now—where the capex growth meaningfully outpaces the revenue growth—the early years, free cash flow is challenged.”
Overall sales rose 17 % to $181.5 billion year‑over‑year, with sales up 12 % in North America and 19 % in the rest of the world, according to the company’s filing.