Dive Brief:
- Amazon reported capital expenditures of $26.3 billion during the final three months of 2024, primarily on infrastructure to support AI and cloud, CEO Andy Jassy said during a Thursday earnings call. The company expects to sustain that level of quarterly spending through the end of the year, exceeding $100 billion.
- The executive defended elevated spend levels. “When AWS is expanding its CapEx, particularly on what we think is one of these once-in-a-lifetime type of business opportunities like AI represents, I think it’s actually quite a good sign medium to long term for the AWS business,” Jassy said.
- AWS’ revenues increased 19% year over year in Q4 and the fiscal year to $28.8 billion and $107.6 billion, respectively. “We continued to see growth in both generative AI and non-generative AI offerings as companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on premise to the cloud, and tap into the power of generative AI,” CFO Brian Olsavsky said.
Dive Insight:
As generative AI boosted cloud consumption, the big three providers mounted a rapid response. AWS, Microsoft and Google Cloud doubled down on infrastructure, pouring tens of billions of dollars into building the capacity needed to train AI models and satisfy enterprise demand in 2024.
AWS ramped up capital spending throughout the year and the vendor’s two primary cloud competitors followed suit. Microsoft CapEx grew to $22.6 billion during the final three months of last year and Google Cloud spent $14 billion in Q4.
Despite posting capital investments that neared cloud revenues for the quarter, Amazon didn’t blink Thursday. Instead, Jassy doubled down on AWS’ buildout strategy, noting that revenues would have been higher if not for cloud capacity constraints.
“It is hard to complain when you have a multibillion-dollar annualized revenue run rate business in AI like we do, and it’s growing triple-digit percentage year over year,” Jassy said. “However, it is true that we could be growing faster, if not for some of the constraints on capacity.”
In addition to building out cloud infrastructure, Amazon expanded its partnership with generative AI model maker Anthropic in November, doubling its investment in the company to $8 billion. The company also unveiled its Nova multimodal LLM family and expanded an alliance with PwC around industry-tailored generative AI solutions as the year came to a close.
Jassy touted practical applications of AWS’ suite of AI models, pointing to Amazon Q capabilities designed to help enterprises migrate applications from Windows to Linux, shift workloads from VMware to cloud and ease migration to cloud from mainframe.
“While AI continues to be a compelling new driver in the business, we haven’t lost our focus on core modernization of companies’ technology infrastructure from on premises to the cloud,” Jassy said.
AWS expects capacity constraints to ease in the second half of the year but there are big hurdles to overcome.
“The world is still constrained on power,” Jassy said. “There are some components in the supply chain, like motherboards, too, that are a little bit short in supply for various types of servers. I think the team has done a really good job scrapping and providing capacity for our customers.”
