Amazon's Chip Business Surpasses $25 Billion, but Spending Concerns Linger
Amazon's chip business has grown to a significant size, with an annual revenue rate of over $25 billion and triple-digit year-over-year growth. This is according to management's guidance on its fiscal Q2 2026 call.
The chips are used in Amazon's cloud unit, AWS, which had revenue of $42.2 billion in the quarter, up 36.7% from a year earlier. Annualized, AWS runs at $169 billion.
Amazon designs several custom chips, including the Graviton processor for general-purpose computing and an AI chip used by companies like Anthropic and OpenAI.
The return on Amazon's spending is still in doubt, with concerns about the company's high capital expenditures of around $220 billion this year. Management expects operating income to drop in the third quarter, but says the margins and returns in AI are tracking the core cloud business at the same stage.