Jassy Sees Amazon's $220B Capex Surge as Necessary Bet on AI Future
Amazon has raised its 2026 capital expenditure (capex) budget to $220 billion, up from the previous $200 billion. CEO Andy Jassy explained that this surge is due to the need to build out new data centers and bring more artificial intelligence (AI) capacity online.
Jassy emphasized that while current pressures on free cash flow are significant, Amazon's data centers have useful lives of 30 years or more, and inside each facility, the company can cycle through five or six generations of servers. This means unit economics improve after the initial capital outlay is no longer repeated.
However, in the near term, Amazon is building multiple data centers simultaneously ahead of when these facilities can generate revenue, leading to elevated capex and pressure on free cash flow until new capacity is monetized and the servers have been utilized for a few years.
Jassy noted that Amazon has navigated similar cycles before, during the first wave of cloud computing, which also required significant investment. He expects AWS to continue growing rapidly, potentially reaching $1 trillion in annual revenue 'in time', driven by AI demand that remains in its early phase.