Amazon's Profit Skyrocket, Fueling CEO Andy Jassy's $100 bn AI Spending Spree

For much of Amazon's early history, investors and competitors criticized the online retailer for its apparent inability to generate profits. Even as recently as 2014, a decade ago, the tech behemoth was unprofitable.

However, Amazon is once again looking like the version of itself that many of its rivals should be afraid of after reporting record-breaking $20 billion in profits in the fourth quarter of 2024 alone, nearly doubling its $10.6 billion from the same quarter the year before. Additionally, Amazon CEO Andy Jassy is intensifying the industry's AI infrastructure arms race as a result of that profit engine boosting and offering a huge cash buffer.

Amazon anticipates spending at least $100 billion on capital expenditures in 2025, up at least 20% from 2024, Jassy informed analysts during an earnings call on Thursday. The vast majority of this year's capital expenditures will go toward Amazon's extensive and profound investments in AI infrastructure, as the tech giant vies for what Jassy calls "probably the biggest technology shift and opportunity since the Internet."

The massive capex comes as Amazon's cloud and AI rivals increase spending. Google's parent company, Alphabet, stated on its most recent earnings call that it expects to spend $75 billion on capital expenses in 2025.

This comfortably profitable version of Amazon is propelled by high margins in the various businesses it has established alongside its online retail empire.  In the fourth quarter, the rapidly expanding AWS cloud computing business reported a healthy operating profit margin of 37%, or $10.6 billion, on $28.8 billion in revenue.

Amazon's advertising business has also helped the company's bottom line. Analysts believe the ad business has an even higher profit margin profile than the cloud computing arm. Amazon's most popular type of ad, known as sponsored product ads and difficult to distinguish from regular merchandise listings, is increasingly dominating the search results that users see when they look up a product on the site. Amazon has also aggressively pursued big brand TV advertising budgets over the past year, selling video ads through its Prime video streaming division.

Keeping costs under control has also been beneficial. Amazon's operating expenses increased by only 6% in 2024, despite an 11% increase in total revenue.

The recent industry frenzy surrounding DeepSeek, which released a powerful AI model called R1 and claimed comparably low costs to create it, alarmed some investors who were concerned that AI tech behemoths like Amazon were overspending on AI. However, during the company's earnings call, Jassy argued to analysts that the inevitable decrease in costs to train and run AI models in the future will result in an explosion of corporate use cases, driving an increase in overall customer spending.

"I think it will make it much easier for companies to infuse all their applciations with inference and generative AI," he added.