‘It’s useful to remember that more than 85 percent of the global IT spend is still on premises, so not in the cloud yet. It seems pretty straightforward to me that this equation will flip in the next 10 to 20 years. Before this generation of AI, we thought AWS has a chance to ultimately be a multi-100-billion-dollar-revenue run rate business. We now think it could be even larger,’ says Amazon President and CEO Andy Jassy.
Amazon Web Services, already a multibillion-dollar business, is set to grow quickly as business customers’ need for AI-based services continues to spike and the company continues its AI investment streak, Amazon CEO Andy Jassy Thursday told financial analysts.
Jassy, in his prepared remarks during the company’s first fiscal quarter 2025 earnings call, said that AWS revenue grew 17 percent year-over-year, and now stands at an annualized run rate of $117 billion as AWS continues to help organizations of all sizes accelerate their move to the cloud, modernize their infrastructure, reduce costs, and speed up innovation.
And, he said, the potential for growth in AWS’ business is huge.
[Related: AWS Optimistic About Growth Despite Supply Chain, Power Constraints]
“It’s useful to remember that more than 85 percent of the global IT spend is still on premises, so not in the cloud yet,” he said. “It seems pretty straightforward to me that this equation will flip in the next 10 to 20 years. Before this generation of AI, we thought AWS has a chance to ultimately be a multi-100-billion-dollar-revenue run rate business. We now think it could be even larger.”
That is leading to aggressive investment in AI, Jassy said.
“If you believe your mission is to make customers’ lives easier and better every day, you believe that every customer experience will be reinvented with AI,” he said. “You’re going to invest very aggressively in AI. And that’s what we’re doing. You can see that in the 1,000-plus AI applications we’re building across Amazon. You can see that with our next generation of Alexa named Alexa+. You can see that in how we’re using AI in our fulfillment network, robotics, shopping, Prime Video, and advertising experiences. And you can see that in the building blocks AWS is constructing for external and internal builders to build their own AI solutions. We’re not dabbling here. We’re very intentionally giving builders the broadest possible capabilities in every level of the AI stack, cost effectively, to use AI expansively across their businesses.”
At the bottom layer for those building models is Amazon’s new custom Trainium2 AI chip, which is seeing significant appeal and demand, Jassy said.
“While we offer customers the ability to do AI with multiple chip providers, and will for as long as I can foresee, customers doing AI at any significant scale realize that it can get expensive quickly,” he said. “So the 30 [percent] to 40 percent better price performance that Trainium2 offers versus other GPU-based instances is compelling. For AI to be as successful as we believe it can be, the price of inference needs to come down significantly. We consider this part of our mission and responsibility to help make it so.”
At the middle layer, AWS is offering Amazon Bedrock to give customers a managed service for building GenAI applications, Jassy said.
“Amazon bedrock is our fully managed service, and offers a choice of high performing foundation models with the most compelling set of features that make it easy to build high-quality generative AI applications,” he said. “We continue to iterate quickly at Bedrock, adding Anthropic’s Claude 3.7 Sonnet hybrid reasoning model, their most intelligent model state, and Meta’s Llama 4 family of models. We were also the first cloud service provider to make DeepSeek R1 and Mistral AI’s Pixtral Large generally available as a fully managed model.”
Amazon Wednesday also introduced the latest premier version of its Amazon Nova state-of-the-art foundation model with Bedrock, Jassy said.
“They deliver frontier intelligence and industry leading price performance,” he said. “And we have thousands of customers already using them. … A few weeks ago, we released Amazon Nova Sonic, the new speech-to-speech foundation model that enables developers to build voice-based AI applications that are highly accurate, expressive, and human-like. Nova Sonic has lower word error rates and higher win rates over other comparable models for speech interactions.”
Amazon is also heavily investing in agentic AI, and going beyond the typical question-answer use, Jassy said.
“Our intention is for agents to perform wide-ranging, complex, multi-step tasks like organizing a trip or setting the lighting, temperature, and music ambience in your house for dinner guests, or handling complex IT tasks to increase business productivity. There haven’t been action-oriented agents like this until Alexa+. But the technology to build these agents is still quite primitive and inaccurate, and requires constant human supervision.”
Amazon just released a research preview of Amazon Nova Act, a new AI model trained to perform actions within a web browser, Jassy said.
“It enables developers to break down complex workflows into reliable automic commands like ‘search’ or ‘checkout’ or answer questions about the screen. It also enables them to add more detailed instructions to these commands where needed, like, ‘don’t accept the insurance upsell.’ Nova Act aims to move the current state of the art accuracy of multi-step agentic actions from 30 [percent] to 60 percent to 90-plus percent, with the right set of building blocks to build these action-oriented agents.
At the top of the AI stack is the Amazon Q GenAI-powered assistant for accelerating software development leveraging a customer’s own data, a fast new agent coding experience within the command line interface to execute complex workflows autonomously, and made generally available GitLab Duo with Amazon Q to let AI agents assist with multi-step tasks, Jassy said.
“Our AI business has a multi-billion-dollar annual revenue run rate continues to grow triple digit year over year percentages,” he said. “And it’s still in its very early days. While there is good reason for the high optimism about AI, I conclude my AWS comments with a reminder that there is still so much on-premises infrastructure yet to be moved to the cloud. Infrastructure modernization is much less sexy to talk about than AI, but fundamental to any company’s technology and invention capabilities [and] developer productivity, speed, and cost structure. And for companies to realize the full potential of AI, they’re going to need their infrastructure and data in the cloud.”
When asked by an analyst during the question-and-answer period about supply constraints related to chips for AI, Jassy said that AWS’ growing multibillion-dollar business means it adds capacity and starts consuming it as soon as it can get new chips.
“I think we could be helping more customers drive more revenue for the business if we had more capacity,” he said. “We have a lot more Tranium2 instances and the next-generation of Nvidia instances landing in the coming months. There are other parts of the supply chain that are a little bit jammed up as well, motherboards and some other componentry, and some of that just because there is so much demand right now. But I do believe that the supply chain issues, the capacity issues, will continue to get better as the year proceeds.”
Jassy, in his prepared remarks, also said that the Trump administration tariffs have had little impact on demand by consumers of Amazon’s retail sales.
“To some extent, we’ve seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact,” he said. “We also have not seen the average selling price of retail items appreciably go up yet. Some of this reflects some forward buying we did in our first-party selling, but some of that reflects some advanced inbounding our third-party sellers have done. But a fair amount of this is that most sellers just haven’t changed pricing yet.”
However, he said, this could change depending on where tariffs settle.
“Amazon is not uniquely susceptible to tariffs as it relates to China,” he said. “Retailers who aren’t buying directly from China are typically buying from companies who themselves are buying from China, marking these items up, rebranding, and selling to U.S. consumers. These retailers are buying the product a higher price than Chinese sellers selling directly U.S. consumers in our marketplace, so the total tariff will be higher for these retailers and for China direct sellers.”
Amazon By The Numbers
For its first fiscal quarter 2025, which ended March 31, Amazon reported total revenue of $155.7 billion, up 9 percent over the $145.3 billion the company reported for its first fiscal quarter 2024.
This included AWS sales of $29.3 billion, up 17 percent; North America sales of $92.9 billion, up 8 percent; and international sales of $33.5 billion, up 8 percent.
Total revenue beat analyst expectations by $580 million, according to Seeking Alpha.
Amazon also reported total GAAP net income of $17.1 billion or $1.59 per share, up from last year’s $10.4 billion or 98 cents per share. The company also reported operating income of $18.4 billion, up from last year’s $15.3 billion.
Looking ahead, Amazon said it expects second fiscal quarter 2025 sales to be between $159.0 billion and $164 billion, or to grow between 7 percent and 11 percent over that of second fiscal quarter 2024.
The company also expects operating income to be between $13 billion and $17.5 billion, compared with last year’s $14.7 billion.
