Amazon to spend up to $200 billion as it ramps up AI investment

Amazon

• AWS revenue rose 24% in Q4 to $35.58B, beating analyst estimates
• AWS operating income hit $12.47B, with margins rising to 35%
• Amazon expects $200B capex in 2026, mainly for AWS and AI infrastructure

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Amazon said on Thursday that revenue from Amazon Web Services surged almost 24% year on year in the fourth quarter, topping analyst expectations and reinforcing the cloud unit’s position as the company’s primary profit engine.

AWS generated $35.58 billion in revenue during the quarter, ahead of StreetAccount estimates of $34.93 billion. The division accounted for about 17% of Amazon’s total revenue over the period.

Operating income at AWS reached $12.47 billion, also beating expectations and making up the vast majority of Amazon’s overall profit. The unit’s operating margin widened slightly to 35%, up from 34.6% in the previous quarter.

Amazon remains the largest player in the global cloud infrastructure market, which it pioneered nearly two decades ago. However, rivals Microsoft and Google continue to grow faster, particularly on the back of artificial intelligence services.

Amazon now expects capital expenditure to reach $200 billion in 2026, primarily driven by AWS, far above the roughly $149 billion forecast by analysts at Visible Alpha.

“Some of it is for our core workloads, which are non-AI workloads, because they’re growing faster than we anticipated,” Amazon CEO Andy Jassy said. “But most of it is in AI. We just have a lot of growth and a lot of demand.”

Jassy said the spending is necessary to keep up with what he described as “very high demand” for Amazon’s AI computing services, which in turn requires massive investment in data centres, chips and networking infrastructure.

“This isn’t some quixotic chase for growth at any cost,” Jassy said. “We’re confident these investments will generate strong returns on invested capital. That’s been true for our core AWS business, and we expect the same to hold here.”

Alphabet said on Wednesday that revenue from Google Cloud jumped about 48% year on year, its fastest pace of growth since 2021. Microsoft, meanwhile, reported last week that revenue from Azure and other cloud services rose 39%, fuelled largely by demand for AI workloads.

During the quarter, AWS launched Nova Forge, a service designed to give customers access to Amazon’s generative AI models during the training phase for deeper customisation. Amazon also announced a $38 billion spending commitment from OpenAI, highlighting AWS’s push to attract leading model builders.

The world’s largest cloud providers are racing to expand AI infrastructure to support companies such as Anthropic and OpenAI. AWS CEO Matt Garman said the company added nearly four gigawatts of computing capacity in 2025 alone.

“For perspective, that’s twice what we had in 2022, when we were an $80 billion annual run rate business,” Jassy told analysts on a conference call. “We expect to double it again by the end of ’27.”

Microsoft CEO Satya Nadella said last week that the company brought almost a gigawatt of capacity online during the fourth quarter, underscoring the scale of investment required to keep up with AI demand.