Amazon.com Inc. reported higher-than-anticipated spending on data center capacity in the first quarter, driving the fastest sales growth for its cloud computing unit in over three years.
Massive Capital Expenditure
The company spent US$151 billion on property and equipment over the 12 months through March 31, an increase of US$57.9 billion compared to the previous year. The investment aims to capture a larger share of business from leading AI startups such as Anthropic PBC and OpenAI.
AWS Sales Growth
Amazon Web Services (AWS), which contributes roughly one-fifth of Amazon's revenue and most of its operating profit, generated US$37.6 billion in sales during the first quarter of 2026. This represents a 28% increase year-over-year, the fastest growth rate since the second quarter of 2022.
Amazon has recently invested in OpenAI and Anthropic through deals committing the labs to spend over US$100 billion on AWS services in the coming years. These partnerships have eased investor concerns about slowing AWS growth and Amazon's lack of a standout consumer AI product comparable to ChatGPT or Gemini.
Future Spending Plans
CEO Andy Jassy stated that Amazon aims to spend approximately US$200 billion this year, a 56% increase from 2025, primarily on data centers, including those tailored for AI services. In the first quarter alone, property and equipment expenses rose to US$44.2 billion, surpassing analyst estimates.
The heavy spending reduced Amazon's trailing 12-month free cash flow to US$1.2 billion at the end of the quarter, down from US$25.9 billion a year earlier.
Stock and Revenue Performance
Shares declined about 2% in extended trading after closing at US$263.04 in New York. The stock has gained 14% year-to-date. Overall first-quarter revenue increased 17% to US$181.5 billion, beating the average analyst estimate of US$177.2 billion. Operating income rose to about US$23.9 billion from US$18.4 billion a year earlier.
E-commerce and Advertising
Amazon's e-commerce operations remain the largest revenue driver. Online sales grew 12% to US$64.3 billion, exceeding the estimated US$62.7 billion. During the quarter, Amazon closed its Fresh grocery markets and cashierless Go convenience stores, continuing its retreat from physical retail.
Advertising revenue increased 24% to US$17.2 billion, beating the projection of US$16.9 billion. Investors closely watch ad growth as it enhances e-commerce profitability.
