Amazon’s AWS surges 28%, but AI spending keeps rising

Amazon’s cloud engine is accelerating fast, but the bill to keep it running is getting larger just as quickly. Amazon said AWS sales rose 28% from a year earlier to $37.6 billion in the first quarter, its strongest growth in 15 quarters, while the company’s trailing 12-month free cash flow fell to $1.2 billion as heavy AI-related infrastructure spending continued to drain cash.

The scale of the business remained formidable. Amazon reported first-quarter net sales of $181.5 billion, up 17% from a year earlier, with operating income of $23.9 billion and diluted earnings per share of $2.78. AWS generated $14.2 billion in operating income, underscoring how much profit the cloud unit still throws off even as Amazon pours more money into data centers, chips and other equipment needed for AI demand.

That spending is moving sharply higher. Amazon said first-quarter capital expenditures reached $44.2 billion, up from $25 billion a year earlier. The company has also said it plans about $200 billion in capital expenditures in 2026, most of it aimed at data centers and AWS infrastructure. Chief executive Andy Jassy has argued that the outlays are necessary to keep up with very high demand for AI compute and are intended to deliver long-term returns, not just a quick boost to revenue.

The cash flow numbers show the pressure behind that strategy. Amazon said the decline in trailing-12-month free cash flow was driven largely by a $59.3 billion year-over-year increase in purchases of property and equipment, which it said primarily reflected investments in artificial intelligence. That is the tradeoff investors are now watching: faster cloud growth and stronger AI demand on one side, and a much heavier infrastructure bill on the other.

Amazon said its AWS backlog stood at $364 billion at the end of the quarter, a figure that did not include more than $100 billion tied to a new Anthropic deal. The company also said its chips business had reached a $20 billion revenue run rate, another sign that AI demand is broadening beyond rented cloud servers into the hardware that powers them.

The market has already signaled unease. Amazon shares fell sharply earlier in the year after the $200 billion capex plan became public, even as Wall Street kept focusing on whether AWS demand and AI monetization can justify the spending. For now, Amazon is betting that the growth in cloud and chips will outrun the cost of building the capacity beneath them.