Amazon Flags Strong AI, Chip Revenue Growth in Letter

Key Moments

AI Revenue Run Rate Tops $15 Billion

Amazon’s chief executive officer, Andy Jassy, told shareholders in a letter on Thursday that artificial intelligence services within the company’s cloud-computing division are generating an annualized revenue run rate of more than $15 billion in the first quarter of 2026. The disclosure helped alleviate some investor concerns about the billions of dollars Amazon is deploying into AI-related initiatives.

Following the release of the letter, Amazon shares rose 2% in pre-market trading.

Amazon has been under scrutiny, alongside its major rivals, to demonstrate that its heavy AI spending will translate into tangible financial returns. In February, the company said it expected capital expenditures to reach $200 billion this year, with most of that outlay aimed at AI development and infrastructure. That projection unsettled some investors and stirred worries about a potential bubble forming in the sector.

Jassy defended the strategy, saying, “We are willing to make large capex investments and endure short-term FCF headwinds for the substantial medium to long-term FCF surplus. AI is a once-in-a-lifetime opportunity where the current growth is unprecedented and the future growth even bigger.”

Positioning Against AI and Cloud Rivals

The shareholder letter marked the first time Amazon has shared specific financial metrics for this AI-related business, which it has backed with substantial investment as it seeks to compete with NVIDIA Corporation (NASDAQ: NVDA), Microsoft Corporation (NASDAQ: MSFT), and Alphabet Inc Class A (NASDAQ: GOOGL) Google.

Citron Research weighed in on the update, stating in an X post, “Too compelling not to comment on Amazon,” and assigning a $300 price target to the stock.

Custom Chip Business Doubles to $20 Billion Run Rate

Jassy also highlighted rapid growth in Amazon’s in-house chip efforts, noting that more large technology companies are building their own chips in an effort to reduce reliance on suppliers such as Nvidia.

According to the letter, the business that includes Amazon’s Graviton processors, Trainium AI chips, and Nitro networking cards has doubled its annualized revenue run rate to over $20 billion. This compares with the $10 billion run rate the company had reported with its fourth-quarter results.

Citron Research described the chip operation as “another trillion-dollar company hidden inside Amazon”.

Potential for Third-Party Chip Sales

Jassy suggested that the chip business could be sizable on a stand-alone basis, saying, “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”.

He also signaled possible future sales of Amazon-designed chips to external customers, noting, “There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future”.

Key Financial Metrics Highlighted