Amazon.com Inc., warned investors that its cloud service could face capacity constraints despite investing around $100 billions in expansion this year, with most of the funding going toward data centers, domestically produce chips and other equipment to provide artificial intelligence services.
Andy Jassy, Amazon’s Chief Executive Officer, has steadfastly turned the company into an AI supermarket by spending countless amounts of money to retain its edge in cloud computing. However, he warned that growth could weaken, while hinting that Amazon could face capacity issues due to hardware shipment delays, and insufficient electricity.
Jassy’s concerns reflect those of Microsoft Corp., its rival, which said last week that its cloud sales growth was hurt because its data center could not keep up to demand for its AI products.
Chip supplies, both from in-house design units and third parties, and electricity constraints are the limiting factors of Amazon Web Services, as these issues have prevented the company from bringing its new data centers online. Those issues will likely subside within 2H2025, said Jassy
In 4Q24, Amazon has spent $26.3 billion in capital expenditures toward AI-related projects within AWS. Jassy told analysts on the call that the expenditures were reasonably representative of what the company planned to spend in 2025.
AWS revenue in 4Q24 soared 19% to $28.8 billion, according to Amazon’s report. It was the third consecutive month that the cloud division saw revenue growth of 19%. Meanwhile, operating income from the unit was $10.6 billion, which surpassed the consensus of $10.1 billion.
The challenge from capacity constraint can be observed from AWS growth that matches its previous quarter pace instead of accelerating, the same problem that Google and Microsoft have, said Sky Cannaves, an analyst at Emarketer.
