Shares of Amazon.com Inc. rose more than 5% today after Chief Executive Andy Jassy published his latest shareholder letter.
The memo is the fifth that Jassy has penned since taking the top post in 2021. Amazon’s first shareholder letter was written by founder Jeff Bezos in 1997, the year the company went public.
One potential reason Wall Street responded positively to the letter is that it contains new data about the growth of Amazon Web Services Inc.’s artificial intelligence business. Jassy wrote that Amazon expects to log $200 billion in capital expenditures this year, most of which will go to AI infrastructure. He went on to state that “we already have customer commitments for a substantial portion of it.”
Some of the demand is expected to come from OpenAI Group PBC. In February, the ChatGPT developer committed to using $100 billion worth of AWS services over the next eight years. “There are several other customer agreements completed (and unannounced), or deep in process,” Jassy wrote in today’s letter.
The executive revealed that two customers had asked to reserve all of the Amazon unit’s AWS Graviton instance capacity, but it turned them down. Graviton is a series of custom central processing units optimized for cost efficiency. AWS offers the chips alongside a line of internally developed AI accelerators called AWS Trainium. The third core pillar of the cloud provider’s custom silicon portfolio is Nitro, a family of infrastructure management and security chips.
Jassy revealed that the annual revenue run-rate of instances powered by AWS’ custom chips exceeds $20 billion. Furthermore, that part of the cloud giant’s business is experiencing triple-digit growth.
“To dimensionalize this versus other chips companies, that run rate is somewhat understated by our currently only monetizing our chips through EC2,” Jassy wrote. “If our chips business was a stand-alone business, and sold chips produced this year to AWS and other third parties (as other leading chips companies do), our annual run rate would be ~$50 billion.”
In the long term, Amazon expects its custom silicon investments to boost not only instance demand but also its operating margins. “We expect Trainium will save us tens of billions of capex dollars per year, and provide several hundred basis points of operating margin advantage versus relying on others’ chips for inference,” Jassy wrote.
Today’s shareholder letter also discusses many of Amazon’s other businesses. One particular focus is Amazon Leo, the low-Earth orbit internet constellation that the company is in the process of building. Jassy revealed that the cloud and retail giant has launched more than 200 satellites to date and expects to bring the network online in mid-2026.
Amazon intends to launch a few thousand additional satellites in the coming years. Additionally, it will roll out an integration with AWS. The feature will make it easier for customers to move data to and from the cloud platform over satellite-powered wireless connections.
In today’s letter to investors, Jassy also previewed several of Amazon’s other business projects.
The company plans to open 100 new Whole Foods locations in the coming years to grow its brick-and-mortar business. Additionally, it’s exploring the possibility of selling its custom supply chain robots to third parties. Amazon has deployed more than 1 million such machines in fulfillment centers to automate merchandise processing tasks
According to Jassy, it’s possible Amazon will also start selling server racks equipped with its custom chips. AWS already enables customers to deploy its infrastructure in their data centers. It sells an appliance series called AWS Outposts that includes, among other things, rack-scale systems for building private clouds.
“We are willing to make large capex investments and endure short-term FCF headwinds for the substantial medium to long-term FCF surplus,” Jassy wrote. “AI is a once-in-a-lifetime opportunity where the current growth is unprecedented and the future growth even bigger.”
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