Amazon is investing heavily in the further expansion of its cloud and AI infrastructure and will be allocating significant capital to this in the coming years. The company plans to invest around $200 billion by 2026, with Amazon Web Services accounting for the lion’s share of that budget.
According to The Register, the explosive growth of AI applications means that demand for computing power is structurally higher than current supply.
According to CEO Andy Jassy (photo), virtually all new capacity added by AWS is immediately purchased by customers. The limitations are mainly on the supply side, such as available energy, hardware, and data center locations. Amazon has added nearly four gigawatts of additional capacity over the past year, underscoring the scale of its data center network. The ambition is to double this capacity again by the end of 2027.
Growth is mainly driven by organizations that make intensive use of AI. They are increasingly moving their data, applications, and training processes to the cloud. Amazon expects AI to play a fundamental role in virtually all digital services and new AI-driven applications to quickly become standard. This development is causing a long-term shift towards cloud platforms such as AWS.
The substantial investments do have an impact on financial ratios. AWS currently achieves operating margins of around 35 percent, but Amazon anticipates fluctuations due to a temporary increase in capital expenditure. However, the company states that these investments are not speculative. Amazon bases its expansion plans on concrete demand patterns and years of experience with capacity planning, with the aim of avoiding overcapacity and securing returns.
Strong revenue growth at AWS
The figures show that AWS is still growing strongly. In the fourth quarter, revenue amounted to $35.6 billion, representing growth of 24 percent compared to a year earlier. For the full year, revenue rose to $128.7 billion. Annual revenue based on the current run rate is now above $140 billion. Nevertheless, investors reacted cautiously to the announced investments, resulting in a sharp decline in the share price in after-hours trading.
A strategic advantage for AWS is the development of its own chips. Amazon is increasingly focusing on Trainium accelerators and Graviton processors to reduce its dependence on external suppliers. These chips are used in large-scale AI environments, including Project Rainier, one of the largest operational AI clusters in the world. AI company Anthropic uses this infrastructure to train models.
The roadmap for Trainium shows that Amazon is continuing its chip strategy. The current generation is almost completely reserved, while subsequent versions promise significant performance improvements. This positions Amazon emphatically as one of the most important providers of scalable and affordable AI infrastructure.