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

Amazon Web Services delivered a standout quarter, with net sales climbing 28% year-over-year to $37.6 billion — its fastest growth rate in 15 quarters. CEO Andy Jassy highlighted the unprecedented nature of this expansion, noting that the last time AWS grew at this clip the business was roughly half its current size. He compared the current AI wave to AWS's early days, revealing that three years into this cycle, AWS's AI revenue run rate has reached $15 billion, nearly 260 times larger than the $58 million run rate three years after AWS launched. The growth is being driven by companies choosing AWS for AI compute, training, and inference workloads, reinforcing Amazon's position as a leading cloud provider for the AI boom.

The rapid growth comes with massive capital requirements. Amazon reported a $59.3 billion year-over-year increase in property and equipment purchases — much of it related to AI infrastructure — which drove free cash flow down 95% to $1.2 billion. Jassy framed this as a necessary short-term investment, explaining that AWS must spend on land, power, buildings, chips, servers, and networking gear before it can monetize them. He drew parallels to the first AWS growth wave, noting that similar spending cycles previously led to substantial downstream revenue and free cash flow. Overall Amazon sales rose 17% to $181.5 billion, with North America growing 12% and international markets up 19%.