Key Highlights
- CEO Andy Jassy addressed concerns about AI investment sustainability in his latest shareholder letter
- AWS AI services have reached an annualized revenue run rate exceeding $15 billion, accounting for approximately 10% of total AWS revenue
- The company’s custom chip division has expanded to a $20 billion annual run rate, double previous levels
- According to Jassy, the chip division could achieve $50 billion in revenue through third-party sales — matching the scale of Broadcom’s AI chip operations
- The company plans $200 billion in capital expenditure for 2026, with AI data centers receiving the majority of investment
In his annual letter to shareholders, Amazon CEO Andy Jassy mounted a vigorous defense of the company’s AI infrastructure spending strategy.
When asked whether AI represents over-hyped technology, whether current spending constitutes a bubble, and whether investments will deliver adequate returns, Jassy wrote: “My strong conviction, at least for Amazon, is that the answers are no, no, and yes.”
Thursday’s letter marked the first occasion Amazon has publicly disclosed specific revenue figures for its AWS AI operations. Based on first-quarter results, the division has achieved an annualized revenue run rate surpassing $15 billion.
This revenue represents roughly 10% of AWS’s total $142 billion run rate. Market observers and financial analysts had long anticipated this transparency.
According to Jassy, AI revenue continues “ascending rapidly,” with AWS growth potentially exceeding current levels if industry-wide capacity limitations were resolved.
The company has allocated $200 billion toward capital expenditure this year, predominantly targeting AI infrastructure development. This substantial investment triggered investor concerns and intensified discussions about potential industry-wide spending excesses.
Jassy countered these concerns directly. “We’re not investing on a hunch,” he emphasized, noting that Amazon has already secured customer commitments covering a substantial portion of AWS capex allocated through 2026.
In-House Chip Division Shows Strong Expansion
Among the letter’s most significant revelations was the performance update on Amazon’s proprietary semiconductor operations. The division — encompassing Trainium AI processors, Graviton chips, and Nitro networking components — has achieved an annualized revenue run rate exceeding $20 billion.
This represents substantial growth from the $10 billion figure Amazon reported during its fourth-quarter earnings announcement.
Jassy provided additional perspective, explaining that if Amazon redirected all internally-produced chips to external customers this year, the division could generate $50 billion in annual revenue.
By comparison, Broadcom’s AI chip segment is projected to deliver approximately $10.7 billion this quarter. Broadcom commands a market capitalization of $1.66 trillion, with significant valuation driven by this business segment.
External Chip Sales Under Consideration
Jassy suggested Amazon may pursue direct chip sales to external customers, positioning the company alongside competitors like Nvidia and Broadcom — currently among Amazon’s own suppliers.
“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,” Jassy stated.
Google has already explored similar territory. Last October, the company announced an agreement to provide Anthropic with one million custom AI processors, representing a deal valued in the tens of billions.
Reuters reported last month that during an internal AWS meeting, Jassy indicated the division could potentially reach $600 billion in annual revenue — twice his previous projection — with AI serving as the primary growth catalyst.
The company has recently reduced its workforce by approximately 30,000 positions, streamlining underperforming business units and adjusting headcount levels established during pandemic expansion.
Amazon shares advanced approximately 1.5% in premarket trading following the shareholder letter’s publication.
