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

Amazon's cloud division continues to thrive, showcasing a remarkable surge in growth that has caught the attention of Wall Street. In its latest financial report, the tech giant revealed that Amazon Web Services (AWS) experienced a staggering 28% increase in net sales year-over-year, reaching a total of $37.6 billion. This marks AWS's fastest growth rate in 15 quarters, as highlighted by Amazon's president and CEO, Andy Jassy, during the earnings call. Jassy attributed this impressive performance to AWS's pivotal role in supporting the booming AI industry. He noted, "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." He emphasized the unprecedented pace of technology growth in the AI sector, asserting that Amazon has established itself as a leader in providing essential services for AI businesses. To put things in perspective, Jassy compared the current growth trajectory of AWS to its early days, stating that three years after its launch, AWS had a revenue run rate of just $58 million. In contrast, during the initial three years of the current AI wave, AWS's AI revenue run rate has skyrocketed to over $15 billion, which is nearly 260 times larger. While AWS is reaping the benefits of increased demand, Amazon is simultaneously investing heavily in infrastructure to support this growth. Jassy confirmed that capital expenditures are expected to continue rising in the near term. He explained, "The faster AWS grows, the more short-term capital expenditures we’ll spend," as the company needs to invest in land, power, buildings, chips, servers, and networking gear ahead of time. These infrastructure investments, while representing short-term cash outflow, are seen as essential for long-term gains. Jassy reassured investors that such spending is necessary for building assets like data centers, which have lifespans exceeding 30 years, as well as chips and servers that last five to six years. Despite the positive outlook, the significant capital investment has raised concerns about Amazon's free cash flow. In the first quarter report, the company disclosed a decrease in free cash flow to $1.2 billion over the trailing twelve months, primarily due to a $59.3 billion increase in property and equipment purchases related to AI. This reflects a 95% drop from the $25.9 billion in free cash flow recorded in the same period in 2025. Overall, Amazon reported a 17% year-over-year increase in total sales, amounting to $181.5 billion. This growth included a 12% rise in North America and a 19% increase in international sales, further demonstrating the company's robust performance in a competitive market.