Amazon’s cloud business, Amazon Web Services (AWS), showed slower growth than expected in the first quarter, marking the third consecutive revenue miss for the division. AWS revenue grew by 17% to $29.27 billion, falling short of the $29.42 billion forecast from analysts. This growth rate also represented a slowdown from the 18.9% increase reported in the previous quarter. AWS continues to be the world’s leading provider of cloud infrastructure, but its growth is facing increased competition from Microsoft’s Azure cloud services, which reported stronger-than-expected performance, as well as from Google’s cloud, which slightly underperformed.
Despite this, the cloud sector still demonstrates healthy growth, with demand remaining steady, particularly in the face of broader economic challenges. Automakers and retailers are bracing for higher costs or lower demand due to new tariffs imposed by the U.S. government, which could impact various industries, including cloud computing.
For the first quarter, AWS posted an operating income of $11.55 billion, exceeding analyst expectations of $10.52 billion. The segment’s operating margin reached 39.5%, the widest it has been since at least 2014. During the quarter, AWS introduced new services, including one for streaming video games and the formation of an agentic artificial intelligence group to expand its AI capabilities.
Capital expenditures for the quarter totaled $24.3 billion, reflecting a 74% year-over-year increase. Looking ahead, Amazon has forecasted approximately $105 billion in capital spending for 2025, with a portion allocated to data centers housing chips that will help train and run artificial intelligence models for cloud clients, such as Anthropic.
CEO Andy Jassy, who previously led AWS, mentioned in a recent shareholder letter that the cost of AI services for customers will decrease over time, particularly due to Amazon’s development of custom chips that offer an alternative to Nvidia’s graphics processing units. He also highlighted the strong potential of AWS’s AI business, which is generating billions in annual revenue. With future advancements like Trainium2, Amazon’s next-generation AI training chip, Jassy is confident that the company will expand its customer base and drive more revenue in the coming months.
Additionally, AWS has gradually reduced its reliance on China for components over the past six years.
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