Key Highlights
- CEO Andy Jassy addressed concerns about AI investment bubbles in his annual letter to shareholders, emphasizing existing revenue generation.
- AWS AI services achieved an annualized revenue run rate exceeding $15 billion during Q1 2026.
- Amazon’s proprietary chip division — featuring Trainium and Graviton products — reached an annualized revenue run rate surpassing $20 billion, up from $10 billion previously.
- Jassy outlined a scenario where Amazon sells chip infrastructure to external customers, creating a potential $50 billion annual chip revenue stream.
- AMZN shares advanced 5.6% to $233.65 on Thursday, marking the strongest single-session performance since October 31, 2025.
In his annual letter to shareholders published Thursday, Amazon CEO Andy Jassy directly confronted skeptics questioning Big Tech’s substantial AI investments. The market’s reaction was immediate and positive.
AMZN shares gained 5.6% to close at $233.65 on Thursday. The advance represented the stock’s strongest daily showing since October 31, 2025, when shares surged 9.58%. Amazon led the Dow Jones Industrial Average for the session.
While Jassy’s letter addressed numerous topics, investors focused on two key revenue figures: $15 billion and $20 billion.
AWS AI services reached an annualized revenue run rate exceeding $15 billion based on first-quarter results. This marks the first instance Amazon has disclosed specific financial metrics for this segment. Microsoft announced in January that its AI operations had surpassed $13 billion in annualized run rate during late 2024.
While these metrics measure different time periods and may vary in calculation methodology, both demonstrate that cloud platform AI investments are generating substantial revenue streams.
Customer Commitments Underpin AWS Capital Spending Strategy
Amazon outlined plans for $200 billion in capital expenditure during 2026, with the majority allocated to AI data center infrastructure. This substantial figure created uncertainty among some market participants earlier in the year.
Jassy defended the spending strategy. “We’re investing based on solid foundations,” he stated. A significant proportion of AWS’s 2026 capital expenditure already has confirmed customer commitments, with revenue recognition expected during 2027 and 2028.
“Of the AWS capex we expect to spend in 2026, much of which will be monetized in 2027-2028, we already have customer commitments for a substantial portion of it,” Jassy wrote.
Brian Mulberry, chief market strategist at Zacks Investment Management, described the AI run-rate disclosure as “a strong validation that AWS is successfully turning the AI boom into real, high-growth revenue.”
Amazon’s $200 billion capital spending plan exceeds the investment levels announced by Microsoft and Alphabet for the same period.
Custom Semiconductor Division Positions Amazon to Challenge Industry Leaders
Jassy’s letter featured another significant disclosure regarding Amazon’s semiconductor operations. The company’s proprietary chip division — encompassing Trainium AI accelerators, Graviton processors, and Nitro networking components — achieved an annualized revenue run rate exceeding $20 billion. This figure represents a doubling from the $10 billion run rate reported with Q4 earnings.
Jassy expanded on future possibilities, suggesting that selling these chips to external customers could create a $50 billion annual revenue opportunity. “There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future,” he stated.
Such a move would position Amazon as a direct competitor to Nvidia and Broadcom in the AI semiconductor market. Broadcom’s AI chip segment is projected to deliver approximately $10.7 billion in revenue during the current quarter alone. Broadcom commands a market capitalization of $1.66 trillion, driven largely by semiconductor operations.
Amazon has entered discussions with OpenAI. The company committed to a $50 billion investment in the ChatGPT creator, with OpenAI agreeing to purchase billions of dollars in Amazon AI chips as part of the arrangement.
Jassy characterized semiconductors as a potential “new pillar for Amazon.”
Amazon’s current market capitalization stands at approximately $2.38 trillion.
