Amazon beats earnings expectations as AWS cloud sales surge

Amazon beat Wall Street’s first-quarter earnings expectations on Wednesday, driven by a surge in its cloud computing division, Amazon Web Services (AWS). While the e-commerce giant experienced growth across its regional markets, the rapid expansion of its AI-fueled cloud business has prompted a massive increase in infrastructure spending.

Amazon president and CEO Andy Jassy attributed the cloud division’s performance to its role in powering the artificial intelligence boom. According to Jassy, AWS is experiencing its fastest growth rate in 15 quarters. He highlighted the rapid expansion of AI by comparing it to the early days of the cloud business. Three years after AWS launched, it had a $58 million revenue run rate—a method of forecasting future revenue based on current financial performance. In comparison, during the first three years of the current AI wave, the AWS AI revenue run rate has reached over $15 billion, which is nearly 260 times larger.

To support this demand, Amazon is heavily investing in infrastructure, which Jassy noted would continue to drive capital expenditure (capex)—the funds a company uses to acquire, upgrade, and maintain physical assets—in the near term. Jassy explained that AWS must lay out cash for land, power, buildings, chips, servers, and networking gear before it can monetize them. While data centers have a useful life of more than 30 years, the chips, servers, and networking gear last for five to six years.

This upfront infrastructure investment has significantly impacted Amazon’s short-term free cash flow—the cash generated by a company after accounting for cash outflows to support operations and maintain capital assets. As Jassy noted, “In times of very high growth like now — where the capex growth meaningfully outpaces the revenue growth — the early years, free cash flow is challenged.”

The financial impact of this spending is detailed in the company’s first-quarter results:

• Sales growth: Overall sales rose 17% year-over-year to $181.5 billion, driven by AWS net sales increasing 28% to $37.6 billion. Regionally, sales grew 12% in North America and 19% throughout the rest of the world.
• Free cash flow drop: Free cash flow decreased to $1.2 billion for the trailing 12 months, representing a 95% drop from the $25.9 billion recorded in the first quarter of 2025.
• Property and equipment purchases: Driven by a year-over-year increase of $59.3 billion in purchases, much of it related to AI infrastructure.

Despite the short-term cash burn, Jassy indicated that Amazon expects a long-term payoff, drawing parallels to the successful monetization of the first major AWS growth wave.

Why it matters

Amazon’s cloud business is surging due to the AI boom, but the company is spending heavily on infrastructure, which is impacting short-term free cash flow.