Amazon Web Services (AWS) has achieved an annualized revenue run rate of more than $123 billion, CEO Andy Jassy revealed in the company’s Q2 2025 earnings call.

The cloud unit saw a revenue of $30.9bn for the quarter, up 17.5 percent year over year (YoY) and more than the previous quarter’s $29.3bn. However, while this positions AWS in the lead against competitors Microsoft and Google in terms of revenue, with the companies reporting $29.9bn and $13.6bn respectively, investors were quick to note that AWS’ revenue growth rate was significantly lower.

Google Cloud revenue has grown 32 percent YoY, while Microsoft was up 26 percent.

Responding to analyst questions on the comparatively low growth for AWS, Jassy said: “Year-over-year percentages and growth rates are always a function of the base in which you operate. And we have a meaningfully larger business in the AWS segment than others. I think the second player is about 65 percent of the size of AWS.

“When we look at the results over the last number of quarters, there are sometimes when, as far as we can tell, we’re growing faster than others, and sometimes others are growing faster than us. But if you look at the second-place player you’re talking about, it’s still a pretty significant market segment leadership position that we have.”

Despite reassuring analysts, against the backdrop of that slower growth, is Amazon’s high capex investment.

The quarter saw a capex of $31.4bn, which CFO Brian Olsavsky said is expected to be “reasonably representative” of the capex rate for the remaining quarters of the year, adding that AWS is the “primary driver” of this.

With Q1 seeing a capex of $24.3bn, this suggests Amazon will see a capex exceeding $118bn for fiscal year 2025, significantly more than the $100bn predicted towards the start of this year.

Google’s latest quarterly capex was $22.4bn, and Microsoft’s $24.2bn.

Major investment commitments made by AWS this quarter include spending $13bn on data centers in Australia by 2029, and $20bn in Pennsylvania.

Despite the large investments, AWS, like its competitors, maintains that it is functioning in a capacity-constrained position – with CEO Jassy stating that power is the biggest constraint currently, followed by “constraints off and on with chips, and then some of the components to make the servers. Sometimes you have new generations of chips that are a little bit later than they’re supposed to be, and sometimes you get the chips, and the yield you get in making servers isn’t what you expect.”

On when he believes this will resolve, Jassy said he doesn’t expect it will be this year: “I think it will take several quarters, but I do expect that it’s gonna get better each quarter, and I’m optimistic about that.

AWS’ operating income for Q2 was $10.2bn, up from $9.3bn the year prior and less than Q1’s $11.5bn.

Operating income is expected to be between $15.5bn and $20.5bn in Q3, compared with $17.4bn in the third quarter of 2024.

Additionally, the segment’s margins decreased from 39.5 percent in the first quarter to 32.9 percent in the second.

According to CFO Olsavsky, this was due to “headwinds from higher depreciation expense as well as unfavorable impacts from year-over-year fluctuations in foreign exchange rates.”

He added: “The depreciation expense is a result of our growing investments in capital expenditures in AWS. As we’ve said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we are making at any point in time. We will continue to invest more capital in chips, data centers, and power to pursue this unusually large opportunity that we have in generative AI.”

The earnings call also saw Amazon execs questioned over what was described as the “Wall Street finance person narrative” that AWS is falling behind on generative AI compared to its peers.

In response, Jassy reiterated that it is still “so early right now in AI,” noting the company’s partnership with Anthropic, seeing the AI company training its models on Amazon’s Trainium2 GPUs.

He added that, as AI moves towards more inference workloads, the company’s home-developed chips are offering a 30-40 percent better price performance. “I think a lot of the compute and the inference is going to be ultimately be run on top of Tranium too. And I think that that price performance is going to matter to people as they get to scale.”

Beyond that, Jassy reiterated a common refrain of his that between 85 and 90 percent of worldwide IT spend is on premises vs in the cloud, and the company expects that equation to flip in the next ten to 15 years.

This shift, Jassy said, will benefit AWS. “A lot of generative AI inference is just going to be another building block like compute, storage, and database. And people are going to want to run those applications close to where their other applications are running, where their data is. There are just so many more applications and data running in AWS than anywhere else.”

Within the on-prem to cloud migration path, Jassy also noted several new agreements with companies, including PepsiCo, Airbnb, Peloton, Nasdaq, London Stock Exchange, Nissan Motor, GitLab, SAP, Warner Bros. Discovery, Twelve Labs, FICO, Iberia Airlines, SK Telecom, and NatWest.

Following the earnings call, Amazon shares dipped 8.21 percent.

https://www.datacenterdynamics.com/en/news/aws-achieves-123bn-annualized-revenue-run-rate-capex-for-the-year-set-to-exceed-118bn/