Amazon is spending a boatload on AI but investors are impatient for results
(2025/08/01)
- Reference: 1754004930
- News link: https://www.theregister.co.uk/2025/07/31/amazon_earnings_q2_2025/
- Source link:
Amazon CEO Andy Jassy insists "AI will change every customer experience," but it's making investors nervous.
The company [1]reported Q2 2025 financial results that exceeded analysts' expectations but nonetheless saw shares slump almost 7 percent in after-hours trading.
The disconnect appears to be projected Q3 2025 operating income, "expected to be between $15.5 billion and $20.5 billion, compared with $17.4 billion in third quarter 2024," per Amazon's earnings release.
[2]
Analysts anticipated that figure would be around $19.48 billion, so a low-end estimate of $4 billion less is noteworthy. [3]Reports [4]suggest investors worry that too much Amazon revenue is going toward investment in infrastructure to support AI.
[5]
[6]
Jassy in February [7]said to expect capex spending of around $100 billion in 2025. That's more than Meta ( [8]$66-72 billion ) and Microsoft ( [9]$80 billion ). Google recently upped its estimate for 2025 capex spending to [10]$85 billion [PDF].
During the company's earnings call, Amazon CFO Brian Olsavsky said the company's Q2 capex was $31.4 billion. That's up from $24.3 billion in Q1. And Olsavsky said that figure would be representative of capex spending for the remainder of the year, implying a total for the year of $118.5 billion.
[11]
Overall, the numbers were pretty good. Amazon reported $167.7 billion in net sales, up 13 percent from $148 billion during the same period a year ago. Operating income rose to $19.2 billion, from $14.7 billion in Q2 2024.
AWS sales accounted for $30.9 billion of this revenue, representing a 17.5 percent increase. AWS now has an annual run rate of more than $123 billion.
Net income reached $18.2 billion, up from $13.5 billion a year prior. In terms of EPS, that translates to $1.68 per share.
It's always "early days" when you're behind
When financial analysts on the earnings call inquired about the AI strategy at AWS, Jassy said "it's still early days" – a popular phrase among tech CEOs – but insisted, "AI is the biggest technology transformation of our lifetime."
[12]AWS Lambda loves charging for idle time: Vercel claims it found a way to dodge the bill
[13]Bitter fight over 2020 Microsoft quantum paper both resolved and unresolved
[14]New Google AI model maps world in 10-meter squares for machines to read
[15]Microsoft's Azure AI Speech needs just seconds of audio to spit out a convincing deepfake
Jassy sees a significant opportunity for AWS to use tools like AWS Transform, an AI agent service, to help enterprises move from on-premises infrastructure to the AWS cloud.
"Remember that eighty-five percent to ninety percent of worldwide IT spend is still on premises versus in the cloud," said Jassy. "In the next ten to fifteen years, that equation is going to flip, further accelerated by companies' excitement for leveraging AI."
[16]
Asked by Brian Nowak, managing director of Morgan Stanley, to respond to talk that AWS is falling behind in generative AI, Jassy said AWS has "a very significant number of enterprises and startups who are running applications on top of AWS's AI services, but the amount of usage and the expansiveness of the use cases and how much people are putting them into production and the number of agents that are going to exist, it's still just earlier stage than it's going to be."
Jassy said that while much of the AI cost now is in training, costs will shift toward inference, which will mean customers paying more attention to the hardware and platform they're using.
"We're at a stage right now where so much of the activity is training and figuring out how to get your generative AI applications into production," he explained. People aren't paying as close attention as they will in making sure that those generative AI applications are operating where the rest of their data and infrastructure is.
"Remember, a lot of generative AI inference is just going to be another building block like compute, storage, and database. And so people are going to actually want to run those applications close to where their other applications are running, where their data is. There's just so many more applications and data running in AWS than anywhere else." ®
Get our [17]Tech Resources
[1] https://ir.aboutamazon.com/news-release/news-release-details/2025/Amazon-com-Announces-Second-Quarter-Results/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://www.cnbc.com/2025/07/31/amazon-amzn-q2-earnings-report-2025.html
[4] https://www.bloomberg.com/news/articles/2025-07-31/amazon-projects-profit-that-underwhelms-on-expense-of-ai-race
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.cnbc.com/2025/02/06/amazon-expects-to-spend-100-billion-on-capital-expenditures-in-2025.html
[8] https://investor.atmeta.com/investor-news/press-release-details/2025/Meta-Reports-Second-Quarter-2025-Results/default.aspx
[9] https://www.theregister.com/2025/07/30/microsoft_hails_cloud_and_ai/
[10] https://abc.xyz/assets/cc/27/3ada14014efbadd7a58472f1f3f4/2025q2-alphabet-earnings-release.pdf
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2025/07/31/aws_lambda_cost_nightmare/
[13] https://www.theregister.com/2025/07/31/microsoft_quantum_paper_science/
[14] https://www.theregister.com/2025/07/31/google_ai_maps_world/
[15] https://www.theregister.com/2025/07/31/microsoft_updates_azure_ai_speech/
[16] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[17] https://whitepapers.theregister.com/
The company [1]reported Q2 2025 financial results that exceeded analysts' expectations but nonetheless saw shares slump almost 7 percent in after-hours trading.
The disconnect appears to be projected Q3 2025 operating income, "expected to be between $15.5 billion and $20.5 billion, compared with $17.4 billion in third quarter 2024," per Amazon's earnings release.
[2]
Analysts anticipated that figure would be around $19.48 billion, so a low-end estimate of $4 billion less is noteworthy. [3]Reports [4]suggest investors worry that too much Amazon revenue is going toward investment in infrastructure to support AI.
[5]
[6]
Jassy in February [7]said to expect capex spending of around $100 billion in 2025. That's more than Meta ( [8]$66-72 billion ) and Microsoft ( [9]$80 billion ). Google recently upped its estimate for 2025 capex spending to [10]$85 billion [PDF].
During the company's earnings call, Amazon CFO Brian Olsavsky said the company's Q2 capex was $31.4 billion. That's up from $24.3 billion in Q1. And Olsavsky said that figure would be representative of capex spending for the remainder of the year, implying a total for the year of $118.5 billion.
[11]
Overall, the numbers were pretty good. Amazon reported $167.7 billion in net sales, up 13 percent from $148 billion during the same period a year ago. Operating income rose to $19.2 billion, from $14.7 billion in Q2 2024.
AWS sales accounted for $30.9 billion of this revenue, representing a 17.5 percent increase. AWS now has an annual run rate of more than $123 billion.
Net income reached $18.2 billion, up from $13.5 billion a year prior. In terms of EPS, that translates to $1.68 per share.
It's always "early days" when you're behind
When financial analysts on the earnings call inquired about the AI strategy at AWS, Jassy said "it's still early days" – a popular phrase among tech CEOs – but insisted, "AI is the biggest technology transformation of our lifetime."
[12]AWS Lambda loves charging for idle time: Vercel claims it found a way to dodge the bill
[13]Bitter fight over 2020 Microsoft quantum paper both resolved and unresolved
[14]New Google AI model maps world in 10-meter squares for machines to read
[15]Microsoft's Azure AI Speech needs just seconds of audio to spit out a convincing deepfake
Jassy sees a significant opportunity for AWS to use tools like AWS Transform, an AI agent service, to help enterprises move from on-premises infrastructure to the AWS cloud.
"Remember that eighty-five percent to ninety percent of worldwide IT spend is still on premises versus in the cloud," said Jassy. "In the next ten to fifteen years, that equation is going to flip, further accelerated by companies' excitement for leveraging AI."
[16]
Asked by Brian Nowak, managing director of Morgan Stanley, to respond to talk that AWS is falling behind in generative AI, Jassy said AWS has "a very significant number of enterprises and startups who are running applications on top of AWS's AI services, but the amount of usage and the expansiveness of the use cases and how much people are putting them into production and the number of agents that are going to exist, it's still just earlier stage than it's going to be."
Jassy said that while much of the AI cost now is in training, costs will shift toward inference, which will mean customers paying more attention to the hardware and platform they're using.
"We're at a stage right now where so much of the activity is training and figuring out how to get your generative AI applications into production," he explained. People aren't paying as close attention as they will in making sure that those generative AI applications are operating where the rest of their data and infrastructure is.
"Remember, a lot of generative AI inference is just going to be another building block like compute, storage, and database. And so people are going to actually want to run those applications close to where their other applications are running, where their data is. There's just so many more applications and data running in AWS than anywhere else." ®
Get our [17]Tech Resources
[1] https://ir.aboutamazon.com/news-release/news-release-details/2025/Amazon-com-Announces-Second-Quarter-Results/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://www.cnbc.com/2025/07/31/amazon-amzn-q2-earnings-report-2025.html
[4] https://www.bloomberg.com/news/articles/2025-07-31/amazon-projects-profit-that-underwhelms-on-expense-of-ai-race
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.cnbc.com/2025/02/06/amazon-expects-to-spend-100-billion-on-capital-expenditures-in-2025.html
[8] https://investor.atmeta.com/investor-news/press-release-details/2025/Meta-Reports-Second-Quarter-2025-Results/default.aspx
[9] https://www.theregister.com/2025/07/30/microsoft_hails_cloud_and_ai/
[10] https://abc.xyz/assets/cc/27/3ada14014efbadd7a58472f1f3f4/2025q2-alphabet-earnings-release.pdf
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2025/07/31/aws_lambda_cost_nightmare/
[13] https://www.theregister.com/2025/07/31/microsoft_quantum_paper_science/
[14] https://www.theregister.com/2025/07/31/google_ai_maps_world/
[15] https://www.theregister.com/2025/07/31/microsoft_updates_azure_ai_speech/
[16] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aIw72DSDfC_4SyVw9YSD9AAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[17] https://whitepapers.theregister.com/
Do y's'pose that someone should tell the investors ...
... that the results are going just as expected?
What, you mean the investors thought THEY were the ones who were going to get rich?
There is indeed one born every minute ...