In its 2025 Letter to Shareholders, Amazon detailed a significant strategic push into Artificial Intelligence, underpinned by a planned capital expenditure of approximately $200 billion in 2026. The investment is driven by unprecedented customer demand for AWS's AI services and custom silicon. While this aggressive spending creates short-term headwinds for free cash flow, the company is investing to become the definitive leader in AI, citing substantial long-term growth potential.
Key Details
- 2026 Capital Expenditure: Amazon plans to invest approximately $200 billion in capex in 2026, largely to build out its AI and cloud infrastructure. This investment is supported by major customer commitments, including over $100 billion from OpenAI.
- AWS AI Revenue Growth: AWS's AI services have achieved an annual revenue run rate of over $15 billion as of Q1 2026 and are growing rapidly, though the company notes it still has unserved demand due to capacity constraints.
- Custom Chip Business: The company's custom chips division (including Trainium and Graviton) now has an annual revenue run rate exceeding $20 billion, which it estimates would be ~$50 billion if operated as a standalone entity.
- Free Cash Flow Impact: Free cash flow for 2025 decreased to $11 billion from $38 billion in the prior year, a change primarily attributed to a $50.7 billion year-over-year increase in capex for AI.