Amazon Defends Massive AI Spending, Says New AWS Capacity Being Monetized Quickly: Andy Jassy Sees Very 'Unusual' Opportunity

On Thursday, Amazon.com, Inc. (NASDAQ:AMZN) pushed back against Wall Street's growing skepticism over soaring AI-related capital expenditures.

Amazon Pushes Back On AI CapEx Concerns

During the company's fourth-quarter earnings call, Amazon addressed investor concerns around its aggressive spending on AI and data center infrastructure, arguing the investments are already producing returns.

Responding to questions from Evercore ISI analyst Mark Mahaney about long-term return on invested capital, CFO Brian Olsavsky said Amazon is seeing immediate utilization of the capacity it is bringing online, particularly within Amazon Web Services.

"We are putting into service with customers all capacity that we are getting and it's immediately useful," Olsavsky said, adding that strong backlog and long-term customer commitments, especially for AI services, reinforce the company's confidence.

AWS Margins Hold Firm Despite AI Investments

Olsavsky highlighted that AWS’s profitability remains resilient even as Amazon ramps up spending.

AWS posted a 35% operating margin in the fourth quarter, up 40 basis points year over year, despite what he described as near-term headwinds from AI-related depreciation.

Margins will "fluctuate over time," he said, noting that Amazon continues to offset AI-related costs through operational efficiencies and cost reductions.

AI Demand Driving Cloud Growth

Most of Amazon's capital expenditures this year are expected to go toward AWS, with the majority tied directly to AI infrastructure. Some spending is also supporting faster-than-expected growth in non-AI workloads.

Amazon CEO Andy Jassy underscored the scale of the opportunity, pointing to AWS' 24% year-over-year growth and an annualized revenue run rate of $142 billion.

"What we are continuing to see is that as fast as we install this capacity, this AI capacity, we are monetizing it. So it’s just a very unusual opportunity," CEO stated.

He added that AI adoption is accelerating cloud migration, as customers increasingly need both their data and applications in the cloud to deploy AI at scale.

Amazon Sees Long-Term Returns From AI Bet

Jassy said Amazon's experience building and scaling AWS — including designing its own chips and networking gear — gives the company an advantage as AI workloads mature.

Over time, he expects AI economics to improve as inference workloads scale, utilization rises and pricing normalizes.

"This isn't some sort of quixotic top-line grab," Jassy stated. " I’m very confident we’re gonna have strong return on invested capital here."

Amazon Beats Q4 Revenue Estimates

Amazon reported fourth-quarter net sales of $213.39 billion, marking a 14% increase from a year earlier and topping Wall Street expectations of $211.30 billion, according to Benzinga Pro.

Pointing to robust demand across its core businesses and emerging areas such as AI, custom chips, robotics and low Earth orbit satellites, Jassy said the company plans to spend roughly $200 billion on capital expenditures in 2026.

Price Action: Amazon shares closed Thursday at $222.69, down 4.42% and slipped further to $197.75 in after-hours trading, a drop of 11.20%, according to Benzinga Pro.

Amazon shares score highly on the Quality metric in Benzinga's Edge Stock Rankings and display a positive price trend across short, medium and long-term time frames.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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