Shares fell sharply by 5% in the wake of the company reporting AWS revenue growth of 19% Year on Year to $28.8 billion, a strong result but one that failed to dazzle investor expectations.
AWS now contributes 17% of Amazon’s total revenue, up from 16% in 2023, though its operating income surged 48% YoY to $10.6 billion, up from $7.2 billion in Q4 2023 as the cloud giant doubles down on AI infrastructure spending.
Subscribe today for free
Andy Jassy, president and CEO of Amazon said the company expects AWS’s growth to be “lumpy” over the next few years due to enterprise adoption cycles, capacity considerations, and “technology advancements impact timing”.
“I spent a fair bit of time thinking several years out,” Jassy told investors. “While it may be hard for some to fathom a world where virtually every app has generative AI infused in it, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks and interact with one another, this is the world we're thinking about all the time.
“We continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS.”
However, Jassy acknowledged that AWS could be expanding even faster if not for supply constraints, including chip shortages, power limitations, and motherboard availability. He expects these constraints to ease in the second half of 2025.
Amazon’s latest earnings report showed AWS remains its profit engine, with 50.1% of its total operating income coming from its cloud business.
The company’s annual figures showed AWS’s segment sales increased 19% year-over-year to $107.6 billion, while its operating income soared from $39.8 billion, compared to $24.6 billion two months prior.
AWS segment operating income was $39.8 billion, compared with an operating income of $24.6 billion in 2023 as the company continues its aggressive expansion of its AI infrastructure, with capital investments expected to top $100 billion in 2025, primarily to meet growing demand for AI workloads and to keep pace with Microsoft Azure and Google Cloud.
It’s already splashing billions of dollars on new data centres in regions including Sweden, Thailand, and the Middle East and betting big on custom silicon to differentiate itself.
The cloud giant’s investments have seen it expand its Trainium2 AI chips and UltraServers as well as Project Rainier, a mammoth supercomputing cluster for Anthropic to train and run inference for its next-gen AI models.
AWS is also working on its next-gen custom silicon teased last year, Trainium3, with Jassy telling investors a preview is expected later this year.
“Building outstanding performant chips that deliver leading price performance has become a core strength of AWS', starting with our Nitro and Graviton chips in our core business and now extending to Trainium and AI and something unique to AWS relative to other competing cloud providers,” Jassy added.
Jassy noted that while AI workloads are growing rapidly, they come with high upfront costs and lower initial margins. He compared it to the early days of cloud computing, suggesting AWS’s profitability in AI will improve over time.
In response to recent concerns about AI infrastructure spending which culminated in the DeepSeek sell-off, Jassy argued that the cost of inference will meaningfully decline while still benefiting AWS’s bottom line.
“If you run a business like we do, where we want to make it as easy as possible for customers to be successful building customer experiences on top of our various infrastructure services, the cost of inference coming down is going to be very positive for customers and for our business,” Jassy said.
Lee Sustar, a principal analyst at Forrester said despite Amazon’s revenue rise, the results for investors were a cause for disappointment.
“Amazon CEO Jassy used the call to highlight that existing equipment will be retired ahead of schedule, with a big hit to 2025 operating income, in addition to ongoing big investments to support the buildout for AWS,” Sustar said. “That will result in lower operating margins. Investors may be impatient about that, but AWS customers will welcome the continued investments.”
RELATED STORIES
AWS pushes back on CMA’s provisional cloud market findings
AWS to invest $5bn in Thailand with new cloud region launch
AWS unveils next-gen data centre tech to meet AI workload demands
