Amazon’s AI Services Generate Significant Revenue
According to CEO Andy Jassy, Amazon’s cloud computing division generates over $15 billion in annual revenue from its AI services. This marks the first time the company has disclosed such figures following substantial investments made in this area.
This figure, derived from results in the first quarter, accounts for approximately 10% of the $142 billion revenue run rate for Amazon Web Services (AWS). It’s something analysts and investors have eagerly anticipated for quite a while.
Jassy shared this information in his annual letter to shareholders on Thursday, outlining a growing confidence in the company’s AI strategy.
In response, Amazon’s stock rose by 4.6% in afternoon trading.
Like many of its competitors, Amazon faces the challenge of proving that its investments in AI are worthwhile. The company has predicted capital spending of $200 billion for this year, mainly focused on AI, a figure that took some investors by surprise and raised concerns about a potential bubble in the industry.
“We’re not investing based on a hunch,” Jassy emphasized.
He added that while a substantial part of the AWS capital spending earmarked for 2026 will yield returns in 2027-2028, much of it has already been contracted with clients.
Investors generally reacted positively to Amazon’s latest information. Brian Mulberry, the chief market strategist at Zacks Investment Management, expressed that the strong utilization rates for AI underline AWS’s capability to convert the AI boom into considerable growth.
Although Jassy referred to it as still being “early days,” he noted that this momentum positions AWS as a frontrunner in AI infrastructure.
On the other hand, smaller competition like Microsoft has projected that its AI business will see an annual revenue run rate exceeding $13 billion by the close of 2024.
While the disclosures from Amazon and Microsoft provide more insight into the companies’ AI-related revenues, comparing them directly is tricky. Revenue run rates predict annual performance based on current sales, and they are quite sensitive to the timeframes from which they are derived.
Jassy also highlighted that Amazon’s custom chip business is experiencing rapid growth as major tech firms create their own processors to lessen reliance on Nvidia’s costly AI chips. This venture, which includes Graviton processors, Trainium AI chips, and Nitro networking cards, now boasts an annual revenue run rate exceeding $20 billion—double the $10 billion announced in the fourth quarter results.
Looking ahead, Jassy hinted that Amazon might sell its chips to external customers in the future. Just last October, competitor Google successfully signed a deal to provide custom AI chips to Anthropic, a developer of Claude, valuing tens of billions of dollars.
“The demand for our chips is so high that there’s a good chance we’ll sell the racks to third parties in the future,” Jassy remarked.
