Athira Sethu
Kochi, 7 February 2025
Amazon.com Inc recently warned its investors that it would face challenges meeting demand for cloud computing services even as it was planning to spend around $100 billion this year. Most of the money is going to building new data centers, developing in-house chips and improving other equipment to support its artificial intelligence (AI) services.
Andy Jassy is the CEO of Amazon, focused on making the company a leader in AI and willing to spend heavily to ensure that the firm remains ahead of the competition in the cloud-computing market. However, he admitted that growth in the area may not be smooth, and it is likely to hit a snag from shortages of hardware and power. He said if not for the challenges, then Amazon’s cloud division, AWS, could grow faster.
These concerns are similar to those raised by Microsoft, which also mentioned that its cloud growth was slowed because of insufficient data centers to meet demand for AI products.
According to Jassy, the availability of chips and power supply from either Amazon’s own chip design or third-party suppliers are constraining AWS’s ability to increase its data centers. He expects these constraints to ease by the second half of 2025.
In the final quarter of 2024, Amazon spent $26.3 billion on capital projects, which went mainly towards AI-related projects within AWS. Jassy revealed to analysts that this spending was akin to the amount the company intends to commit in 2025.
Amazon’s AWS revenue increased by 19% to $28.8 billion in the fourth quarter, with operating income at $10.6 billion, which was above expectations. Still, AWS growth was slower than expected, at the same pace as the previous quarter, because of capacity issues faced by competitors like Google and Microsoft.
While overall business at Amazon was quite strong during the holiday quarter, thanks to growth in e-commerce and logistics, Jassy’s caution around the capability of AWS concerned investors more than the positives. Amazon shares declined about 4% in the after-hours session.
Amazon projects a decrease in profits for the first quarter of 2025, which it estimates at between $14 billion and $18 billion in operating income. This is lower than analysts’ expectations, partly because of currency changes and an extra day in the previous year’s quarter that added $1.5 billion to sales.
Amazon reported revenues of $187.8 billion in the holiday quarter, with a 10% increase year over year. Operating profit is $21.2 billion above expectations, though operating expenses were up 6.2%. The company grew its workforce 2%, employing more than 1.55 million at quarter’s end.
