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

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

Amazon was one among a number of tech giants that on Wednesday beat Wall Street’s first-quarter earnings expectations, providing more monetary proof that the AI increase continues to reward corporations that provide the picks and shovels.

Amazon’s cloud business is the latest instance. Amazon Web Services, buoyed by its position in fueling the AI increase, noticed its web sales improve 28% year-over-year, climbing to $37.6 billion, the company said Wednesday. It was the quickest progress charge for AWS in 15 quarters, Amazon president and CEO Andy Jassy said during the company’s earnings name.

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

“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,” Jassy said. “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 in contrast the business unit’s progress to the aughts. “To put our growth in perspective, 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.”

Even as cash flows into its cloud business, Amazon is also sinking more and more large gobs of capital into constructing out the infrastructure that helps that cloud. Jassy said on Wednesday that capital expenditure progress would continue in the close to time period.

“The faster AWS grows, the more short-term capex we’ll spend,” he said. “AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear, in advance of when we can monetize it.”

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Jassy positioned these investments as short-term money burn for a long-term payoff, noting that these capital expenditures fund belongings like data facilities that last more than 30 years or chips, servers, and networking gear that have a useful 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 also supplied more than a touch at how that type of spending would have an effect on free money move.

“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,” he said.

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

“We’ve been through this cycle with the first big AWS growth wave, and like the results. We expect to feel similarly about this next wave with much larger potential downstream revenue and free cash flow,” he added.

The e-commerce large’s total sales, meanwhile, rose 17% to $181.5 billion on a year-over-year foundation. Sales grew 12% in North America and 19% throughout the remainder of the world, the company reported.

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