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Home»Finance»Amazon, Echoing Microsoft, Says It Can’t Keep Up With AI Demand
Finance

Amazon, Echoing Microsoft, Says It Can’t Keep Up With AI Demand

February 7, 2025No Comments4 Mins Read
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Amazon, Echoing Microsoft, Says It Can’t Keep Up With AI Demand
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(Bloomberg) — Amazon.com Inc. warned buyers that it may face capability constraints in its cloud computing division regardless of plans to take a position some $100 billion this yr, with a lot of the cash going towards information facilities, homegrown chips and different gear to supply synthetic intelligence companies.

Most Learn from Bloomberg

Chief Government Officer Andy Jassy, decided for Amazon to turn out to be an AI grocery store, is spending massive to retain the corporate’s edge in cloud-computing companies. Nonetheless, he warned progress could be “lumpy” and hinted Amazon may face capability points associated to delays in getting {hardware} and never having ample electrical energy.

“It’s true we may very well be rising quicker have been it not for a number of the constraints on capability,” Jassy mentioned on a convention name Thursday after the discharge of fourth-quarter outcomes.

The considerations echo these of rival Microsoft Corp., which final week mentioned its cloud gross sales progress was harm as a result of it didn’t have sufficient information facilities to deal with demand for its AI merchandise.

Jassy mentioned the availability of chips — from third events and Amazon’s personal chip design unit — and energy capability are limiting the flexibility of Amazon Net Providers to carry new information facilities on-line. These constraints will seemingly ease within the second half of 2025, he mentioned.

Amazon spent $26.3 billion in capital expenditures within the final three months of 2024, the overwhelming majority of which went towards AI-related tasks inside AWS. Jassy advised analysts on the decision that the quantity was “fairly consultant” of the speed of outlays the corporate deliberate to make in 2025.

The corporate reported that AWS income jumped 19% to $28.8 billion within the quarter ended Dec. 31. It was the third straight interval of 19% progress for the cloud unit. Working revenue generated by the unit was $10.6 billion, exceeding the typical projection of $10.1 billion.

“AWS progress didn’t speed up as anticipated and as a substitute matched Q3 ranges, indicating that the corporate is challenged by the identical sorts of capability constraints going through rivals Google and Microsoft,” mentioned Sky Canaves, an analyst at Emarketer.

Jassy’s warning on AWS progress constraints overshadowed a reasonably sturdy vacation quarter, suggesting the corporate’s most important e-commerce and logistics enterprise is heading off competitors from Walmart Inc. and low cost upstarts like Temu and Shein.

The shares declined about 4% in prolonged buying and selling after closing at $238.83 in New York. The inventory has gained 8.9% up to now this yr after a 44% leap in 2024.

The AI race will seemingly overwhelm income. Working revenue can be $14 billion to $18 billion within the interval ending in March, the Seattle-based firm mentioned in an announcement. Analysts, on common, projected $18.2 billion, based on information compiled by Bloomberg. First-quarter gross sales can be as a lot as $155.5 billion, in contrast with a median estimate of $158.6 billion.

Whereas Amazon’s total quarter was usually optimistic, “buyers rapid considerations are round Q1 steering, which was under expectations, largely due to the influence of an enormous forex drag and the influence of lapping a bissextile year,” mentioned Gil Luria, an analyst at DA Davidson & Co. The corporate mentioned the additional day within the quarter in 2024 boosted gross sales by about $1.5 billion.

Whole income within the vacation quarter elevated 10% to $187.8 billion, barely forward of analyst estimates. Working revenue was $21.2 billion, in contrast with the typical estimate of $18.8 billion.

Whole working bills rose 6.2% to $166.6 billion — marking the eighth consecutive quarter that Amazon’s income elevated at the next price than prices. The corporate employed greater than 1.55 million full- and part-time employees on the finish of the quarter, a 2% improve from a yr earlier.

(Updates with CEO feedback on capability constraints in second paragraph)

Most Learn from Bloomberg Businessweek

©2025 Bloomberg L.P.

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