On Thursday, Amazon.com, Inc. (NASDAQ:AMZN) pushed back against Wall Street’s skepticism regarding its substantial capital expenditures on artificial intelligence (AI) and data center infrastructure. During the company’s fourth-quarter earnings call, Amazon addressed investor concerns about its aggressive spending, asserting that these investments are already yielding returns.
Responding to inquiries from Evercore ISI analyst Mark Mahaney about long-term returns on invested capital, CFO Brian Olsavsky emphasized that Amazon is witnessing immediate utilization of the capacity it is bringing online, particularly within Amazon Web Services (AWS). “We are putting into service with customers all capacity that we are getting and it’s immediately useful,” Olsavsky stated, highlighting the strong backlog and long-term customer commitments in AI services that bolster the company’s confidence.
Olsavsky also noted that AWS’s profitability remains robust despite the ramp-up in spending. The division posted a 35% operating margin in the fourth quarter, reflecting an increase of 40 basis points year-over-year, even in the face of near-term challenges stemming from AI-related depreciation. “Margins will fluctuate over time,” he noted, adding that Amazon continues to counterbalance AI-related costs through operational efficiencies and cost reductions.
The bulk of Amazon’s capital expenditures this year is expected to be allocated to AWS, with a significant portion directly linked to AI infrastructure. Some of this spending is also aimed at accommodating faster-than-anticipated growth in non-AI workloads. CEO Andy Jassy pointed out the scale of the opportunity, with AWS achieving 24% year-over-year growth and an annualized revenue run rate of $142 billion. “What we are continuing to see is that as fast as we install this capacity, this AI capacity, we are monetizing it. So it’s just a very unusual opportunity,” Jassy remarked.
Jassy further highlighted that the acceleration in AI adoption is driving cloud migration, as customers increasingly require both their data and applications to be housed in the cloud for large-scale AI deployment. He stated that Amazon’s extensive experience in building and scaling AWS—including the design of its own chips and networking gear—positions the company favorably as AI workloads evolve. He expressed confidence in the long-term returns from Amazon’s AI investments, suggesting that the economics around AI will improve as utilization increases and pricing stabilizes. “This isn’t some sort of quixotic top-line grab,” he added. “I’m very confident we’re gonna have strong return on invested capital here.”
In terms of financial performance, Amazon exceeded Wall Street’s expectations for fourth-quarter net sales, reporting $213.39 billion—a 14% increase from the previous year and surpassing estimates of $211.30 billion, according to Benzinga Pro. Jassy attributed this strong performance to robust demand across Amazon’s core businesses and emerging sectors such as AI, custom chips, robotics, and low Earth orbit satellites. Looking ahead, he indicated that the company plans to invest approximately $200 billion in capital expenditures by 2026.
Amazon’s assertive stance on its AI spending reflects its broader strategy to lead in the burgeoning cloud market. As competition intensifies among tech giants to harness AI capabilities, Amazon’s commitment to its cloud infrastructure and innovative technologies is likely to play a critical role in shaping its future growth trajectory.
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