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Amazon’s cloud computing arm delivered another standout quarter, beating Wall Street expectations on both revenue and profit, even as the parent company prepares to dramatically scale up spending on artificial intelligence and data center infrastructure over the next several years.

Amazon Web Services reported fourth-quarter revenue of $35.58 billion, up almost 24% year over year and ahead of analysts’ estimates of $34.93 billion. AWS accounted for roughly 17% of Amazon’s total quarterly revenue, yet contributed the majority of the company’s operating profit, underscoring its central role in Amazon’s financial engine.

Operating income at AWS climbed to $12.47 billion, topping consensus forecasts of $11.91 billion. The cloud unit’s operating margin also edged higher to 35%, compared with 34.6% in the prior quarter, reflecting improved efficiency even as Amazon continues to pour capital into expanding capacity.

Cloud competition intensifies as AI demand surges

While AWS remains the global leader in cloud infrastructure, competition from Microsoft and Google is accelerating, particularly as enterprises race to adopt generative AI.

Alphabet revealed this week that revenue from Google Cloud jumped about 48% year over year, marking its fastest growth since 2021. Microsoft, meanwhile, reported that Azure and related cloud services expanded 39% in its most recent quarter. Analysts widely agree that both rivals are seeing especially strong momentum from AI workloads, putting pressure on AWS to scale rapidly to defend its market share.

To stay ahead, Amazon has been rolling out new AI-focused products and partnerships. During the quarter, AWS introduced Nova Forge, a platform that allows customers to access Amazon’s generative AI models during training for deeper customization. The company also disclosed a $38 billion spending commitment tied to OpenAI-related infrastructure, highlighting how aggressively hyperscalers are competing to host the world’s most advanced models.

Infrastructure buildout hits unprecedented scale

Behind the scenes, Amazon is expanding its physical footprint at a pace rarely seen in the tech sector. AWS CEO Matt Garman said the company added nearly 4 gigawatts of computing capacity in 2025 alone, a massive increase driven by soaring demand for AI training and inference.

Andy Jassy put that figure into perspective during a conference call with analysts.

“Just for perspective, that’s twice what we had in 2022, when we were an $80 billion annual run-rate business,” Jassy said. “And we expect to double it again by the end of 2027.”

Rivals are moving just as fast. Microsoft CEO Satya Nadella recently noted that his company brought almost one gigawatt of new capacity online in the fourth quarter by itself, illustrating the scale of the industry-wide infrastructure race.

Amazon targets $200 billion in capital spending

Looking ahead, Amazon plans to invest at an extraordinary level. Jassy said the company expects capital expenditures to reach approximately $200 billion in 2026, with the vast majority directed toward AWS data centers, chips, networking equipment, and AI infrastructure. That figure is dramatically higher than Wall Street expectations, which had centered closer to $149 billion.

Jassy explained that while some of the spending will support traditional cloud workloads, most of it is tied directly to artificial intelligence.

“Some of it is for our core workloads, which are non-AI workloads, because they’re growing at a faster rate than we anticipated,” he said. “But most of it is in AI, and we just have a lot of growth, a lot of demand.”

The company has also signaled that its overall capital investment will continue rising through the end of 2027, effectively doubling current spending levels as Amazon races to meet what executives describe as unprecedented customer demand for AI compute.

AWS remains Amazon’s profit engine

Despite representing less than a fifth of Amazon’s total revenue, AWS continues to generate the bulk of the company’s operating income, giving Amazon the financial firepower to fund its ambitious expansion plans. Industry analysts note that this profitability advantage allows Amazon to invest more aggressively than many competitors, even as margins across the tech sector come under pressure.

With enterprise adoption of generative AI accelerating and hyperscalers locked in a multiyear infrastructure arms race, AWS’s latest results suggest Amazon is determined to defend its leadership position. The combination of strong revenue growth, expanding margins, and massive capital commitments signals that the company views AI not as a side project, but as the core driver of its next decade of growth.

As businesses worldwide increasingly rely on cloud-based AI tools, Amazon is betting that today’s historic spending spree will translate into durable returns and deeper customer lock-in, reinforcing AWS as the backbone of the digital economy.

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