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

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.

Amazon’s cloud business is the latest example. Amazon Web Services, buoyed by its role in fueling the AI boom, saw its net sales increase 28% year-over-year, climbing to $37.6 billion, the company said Wednesday. It was the fastest growth rate for AWS in 15 quarters, Amazon president and CEO Andy Jassy said during the company’s earnings call.

Jassy attributed AWS’ success to its role in providing compute to the AI industry.

“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 compared the business unit’s growth 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 money flows into its cloud business, Amazon is also sinking increasingly large gobs of capital into building out the infrastructure that supports that cloud. Jassy said on Wednesday that capital expenditure growth would continue in the near term.

“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.”

Jassy positioned these investments as short-term cash burn for a long-term payoff, noting that these capital expenditures fund assets like data centers that last more than 30 years or chips, servers, and networking gear that have a useful life for five to six years.

Jassy did attempt to quell investor fears that the e-commerce giant was spending too much on infrastructure. He also provided more than a hint at how that kind of 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,” he said.

Amazon’s first-quarter earnings report reflects the pull on free cash flow. T he company reported that free cash flow decreased to $1.2 billion for the trailing twelve months, driven primarily by a year-over-year increase
of $59.3 billion in purchases of property and equipment — much of its related to AI. That’s a 95% drop from the $25.9 billion in free cash flow 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 giant’s overall sales, meanwhile, rose 17% to $181.5 billion on a year-over-year basis. Sales grew 12% in North America and 19% throughout the rest of the world, the company reported.