Amazon's CEO promises that investments in AI will pay off as capital spending increases by 81%

Amazon CEO Andy Jassy is trying to reassure investors who may be worried about the future profitability of the company's massive investment in generative artificial intelligence.

In a conference call with analysts following the company's third-quarter earnings report on Thursday, Jassy noted the success of Amazon's cloud computing business, Amazon Web Services, which has grown despite the extreme costs associated with building data centers. has developed into a decisive profit driver.

“I think we've proven over time that we can generate enough operating income and free cash flow to make this business a very successful return on capital,” Jassy said. “We expect the same thing to happen here with generative AI.”

Amazon spent $22.6 billion on property, plant and equipment in the quarter, up 81% year over year. Jassy said Amazon plans to spend $75 billion on capital expenditures in 2024 and expects an even higher figure for 2025.

The increase in spending is primarily due to investments in generative AI, Jassy said. The company is rushing to invest in data centers, networking equipment and hardware to meet huge demand for the technology, which has become increasingly popular since OpenAI released ChatGPT Assistant nearly two years ago.

“It’s a really unusually large, perhaps once-in-a-lifetime opportunity,” Jassy said. “And I think our customers, the company and our shareholders will be pleased with this long-term direction that we are pursuing aggressively.”

AI spending was a big topic on technology earnings calls this week. Meta On Wednesday, the company raised its investment guidance and CEO Mark Zuckerberg said he was “pretty pleased” with the team's execution. In the meantime, MicrosoftThe investment in OpenAI weighed on fiscal first-quarter results reported Wednesday, and the company said capital spending would continue to rise. A day earlier, Alphabet CFO Anat Ashkenazi warned that the company expects capital spending to rise in 2025.

Amazon has said its cloud unit has received more business from companies that need infrastructure to deploy generative AI models. Additionally, the company has launched several AI products for enterprises, third-party vendors on its marketplace, and advertisers in recent months. The company is expected to announce a souped-up version of its Alexa voice assistant that includes generative AI. Jassy said this will happen “in the near future.”

Amazon hasn't disclosed its generative AI revenue, but Jassy said Thursday that it has grown into a “multibillion-dollar revenue business” within AWS that “continues to grow at a triple-digit rate year-over-year.”

“At this stage in its development, it is growing more than three times faster than AWS itself, and we felt that AWS was growing quite quickly,” he added.

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