Amazon Cloud Booms as Capital Spending Soars
▼ Summary
– Amazon Web Services (AWS) net sales rose 28% year-over-year to $37.6 billion, its fastest growth in 15 quarters, driven by AI demand.
– CEO Andy Jassy noted AWS’s AI revenue run rate is $15 billion, nearly 260 times larger than its early growth phase.
– Amazon expects capital expenditure to keep rising in the near term to fund infrastructure like data centers and chips.
– Free cash flow dropped 95% to $1.2 billion for the trailing twelve months due to a $59.3 billion increase in property and equipment purchases, largely for AI.
– Overall Amazon sales grew 17% to $181.5 billion, with 12% growth in North America and 19% internationally.
Amazon once again exceeded Wall Street’s first-quarter expectations on Wednesday, joining a growing list of tech giants whose strong results underscore a simple truth: the AI boom continues to reward the companies selling the essential tools and infrastructure.
The latest proof came from Amazon Web Services (AWS), the company’s cloud computing arm. Net sales for AWS jumped 28% year-over-year, reaching $37.6 billion. According to Amazon President and CEO Andy Jassy, that marks the fastest growth rate for the division in 15 quarters. He credited the surge to AWS’s central role in powering artificial intelligence workloads.
“It’s very unusual for business to grow this fast on a base this large,” Jassy said during the earnings call. “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.”
To put the scale in perspective, Jassy compared the current AI wave to AWS’s early years. “Three years after AWS launched, it had a $58 million revenue run rate. During the first three years of this AI wave, AWS’s AI revenue run rate is over $15 billion , nearly 260 times larger.”
Yet even as money pours into its cloud business, Amazon is spending heavily on the infrastructure that makes it all possible. Jassy confirmed that capital expenditure growth will continue in the near term. “The faster AWS grows, the more short-term capex we’ll spend,” he explained. “AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear, in advance of when we can monetize it.”
Jassy sought to reassure investors worried about the pace of spending, framing it as a necessary short-term sacrifice for long-term gains. These investments fund assets like data centers that last more than 30 years, or chips, servers, and networking gear with a useful life of five to six years. He also hinted at how such spending would affect free cash flow.
“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,” Jassy said.
The first-quarter earnings report bore that out. Amazon’s free cash flow for the trailing twelve months dropped to $1.2 billion, a 95% decline from the $25.9 billion reported in the first quarter of 2025. The main driver: a year-over-year increase of $59.3 billion in property and equipment purchases, much of it tied to AI.
“We’ve been through this cycle with the first big AWS growth wave, and we liked the results,” Jassy added. “We expect to feel similarly about this next wave with much larger potential downstream revenue and free cash flow.”
Overall, Amazon’s total sales rose 17% year-over-year to $181.5 billion. North American sales grew 12%, while international sales climbed 19%.
(Source: TechCrunch)
