Amazon’s cloud business is surging — and so is its capital spending

Amazon was certainly one of a number of tech giants that on Wednesday beat Wall Road’s first-quarter earnings expectations, providing extra monetary proof that the AI growth continues to reward corporations that offer the picks and shovels.

Amazon’s cloud enterprise is the newest instance. Amazon Internet Providers, buoyed by its position in fueling the AI growth, noticed its internet gross sales enhance 28% year-over-year, climbing to $37.6 billion, the corporate mentioned Wednesday. It was the quickest progress charge for AWS in 15 quarters, Amazon president and CEO Andy Jassy mentioned throughout the firm’s earnings name.

Jassy attributed AWS’ success to its position in offering compute to the AI trade.

“It’s very uncommon for enterprise to develop this quick on a base this huge. The final time we noticed progress at this clip, AWS was roughly half the dimensions,” Jassy mentioned. “We’ve by no means seen a expertise develop as quickly as AI. Amazon is already a pacesetter, and firms proceed to decide on AWS for AI.”

Jassy in contrast the enterprise unit’s progress to the aughts. “To place our progress in perspective, three years after AWS launched, it had a $58 million income run charge. [During] the primary three years of this AI wave, AWS’s AI income run charge is over $15 billion — practically 260 instances bigger.”

At the same time as cash flows into its cloud enterprise, Amazon can be sinking more and more massive gobs of capital into constructing out the infrastructure that helps that cloud. Jassy mentioned on Wednesday that capital expenditure progress would proceed within the close to time period.

“The quicker AWS grows, the extra short-term capex we’ll spend,” he mentioned. “AWS has to put out money for land, energy, buildings, chips, servers, and networking gear, prematurely of once we can monetize it.”

Jassy positioned these investments as short-term money burn for a long-term payoff, noting that these capital expenditures fund belongings like information facilities that final greater than 30 years or chips, servers, and networking gear which have a helpful life for 5 to 6 years.

Jassy did try to quell investor fears that the e-commerce large was spending an excessive amount of on infrastructure. He additionally supplied greater than a touch at how that type of spending would have an effect on free money stream.

“In instances of very excessive progress like now — the place the capex progress meaningfully outpaces the income progress — the early years, free money stream is challenged,” he mentioned.

Amazon’s first-quarter earnings report displays the pull on free money stream. T he firm reported that free money stream decreased to $1.2 billion for the trailing twelve months, pushed primarily by a year-over-year enhance
of $59.3 billion in purchases of property and tools — a lot of its associated to AI. That’s a 95% drop from the $25.9 billion in free money stream it had within the first quarter of 2025.

“We’ve been by this cycle with the primary huge AWS progress wave, and just like the outcomes. We anticipate to really feel equally about this subsequent wave with a lot bigger potential downstream income and free money stream,” he added.

The e-commerce large’s general gross sales, in the meantime, rose 17% to $181.5 billion on a year-over-year foundation. Gross sales grew 12% in North America and 19% all through the remainder of the world, the corporate reported.