Amazon Cloud Growth Fuels Big Spending, But Cash Flow Takes a Hit

Amazon’s cloud arm, Amazon Web Services (AWS), has seen its sales jump 28% year‑over‑year to $37. 6 billion, the fastest rise in 15 quarters. The boost comes from the company’s role in supporting artificial‑intelligence projects, which keep businesses turning to AWS for computing power. CEO Andy Jassy said the growth is “unusual” given the size of the business and compared it to the early days of AWS, when revenue was just $58 million; today the AI‑related revenue run rate tops $15 billion, a 260‑fold increase. At the same time, Amazon is pouring more money into the infrastructure that powers its cloud. Jassy explained that rapid expansion means higher short‑term capital expenditures (capex) for land, power, buildings, chips, servers and networking gear. These assets are meant to last decades for data centers or five‑to‑six years for hardware, so the spending is seen as a long‑term investment even though it hurts free cash flow now.Free cash flow has fallen sharply, down to $1. 2 billion for the trailing twelve months, largely because of a $59. 3 billion jump in property and equipment purchases last year—most of it linked to AI. That is a 95% drop from the $25. 9 billion free cash flow reported in Q1 of 2025. Jassy acknowledged that high growth periods can strain cash, but he believes the company has weathered similar cycles before and expects future waves to bring stronger revenue and cash flow. Amazon’s strategy shows a clear trade‑off: invest heavily in the next generation of cloud technology now, even if it means lower cash flow today. Investors will need to watch how quickly the company can convert these large capex outlays into profitable returns, especially as competition in cloud services and AI accelerators intensifies.