Amazon’s AWS is printing money — but the spending spree isn’t over

Amazon dropped its Q1 2026 earnings today, and the headline is familiar: AWS is still the cash cow, and Amazon is still spending like it’s preparing for a war it intends to win.

AWS revenue came in at $28.7 billion for the quarter, beating analyst estimates by about a billion. That’s a 17% year-over-year growth rate, which is actually pretty impressive for a business that’s been running hot for over a decade. The cloud division now accounts for roughly 18% of Amazon’s total revenue, but it’s pulling way more weight on the profit side — operating income from AWS was $9.4 billion, representing about 62% of Amazon’s total operating profit.

But here’s where it gets interesting. Amazon’s capital expenditures hit $18.2 billion this quarter, up 42% from the same period last year. And CEO Andy Jassy wasn’t shy about what’s driving that: AI infrastructure. Data centers, GPUs, networking gear — the whole stack. He said on the earnings call that the company expects CapEx to keep climbing through 2026, which is a signal that Amazon isn’t just dipping its toes into the AI pool; it’s building a whole new wing.

This is higher than I expected, honestly. I’ve been watching hyperscaler spending for years, and there’s always a point where you wonder if the ROI will materialize. Amazon seems confident it will. Jassy pointed to AWS’s AI services — Bedrock, SageMaker, Trainium chips — as areas where demand is “extraordinary.” He specifically called out Anthropic, which runs a big chunk of its training and inference on AWS, as a key customer driving that demand.

But let’s not pretend this is risk-free. The cloud market is getting crowded. Microsoft Azure is making aggressive moves with OpenAI integration, and Google Cloud is finally showing some discipline and growth. Amazon’s lead in market share is still comfortable — around 32% to Azure’s 23% — but the gap isn’t widening the way it used to. Everyone is spending big on AI, and the question is whether the total addressable market is growing fast enough to justify all this capital.

One thing that stood out to me: Jassy mentioned that AWS’s AI revenue is now running at an annualized rate of over $10 billion. That’s a big number, but it’s still a fraction of AWS’s overall $115 billion-plus run rate. The AI boom is real, but it hasn’t completely reshaped the cloud business yet.

On the retail side, Amazon’s e-commerce revenue grew 8% to $58.3 billion. Nothing flashy, but steady. Advertising continues to be a quietly massive business — $12.5 billion in revenue, up 24%. That’s now bigger than AWS was just a few years ago.

So what does this all mean? Amazon is betting that the AI infrastructure buildout will pay off the same way its earlier investments in fulfillment centers and AWS itself did. Jassy’s track record is good, but this spending cycle feels different. The scale is unprecedented, and the competitive landscape is shifting faster than ever.

I’ll be watching the next few quarters closely. If AWS growth accelerates, the spending thesis holds. If it stalls, those $18 billion quarters are going to start looking like a problem. For now, though, Amazon is all in.