We’re not going to be conservative

Amazon CEO Andy Jassy on Thursday launched his annual shareholder letter and as soon as once more made the case to Wall Road buyers that the corporate’s enormous investments in artificial intelligence are worthwhile.

“We’re not going to be conservative in how we play this — we’re investing to be the significant chief, and our future enterprise, working earnings, and [free cash flow] might be a lot bigger due to it,” Jassy wrote.

The corporate disclosed in February that it expects to spend roughly $200 billion this yr on capital expenditures, with the lion’s share going towards AI infrastructure, together with information facilities, chips and networking gear.

That is greater than any of its tech peers, and an almost 60% enhance from final yr.

Amazon shares have struggled to this point this yr as buyers query the corporate’s aggressive AI spending plans and develop more and more impatient about when the investments will repay. The inventory has slid greater than 4% yr thus far.

Jassy has said that Amazon wants the capital to go after “a once-in-a-lifetime alternative” and to maintain tempo with “very excessive demand” for the corporate’s AI compute.

He reiterated that argument on Thursday and in addition disclosed for the primary time that AI income in its cloud computing phase has hit a $15 billion annual run charge.

“We’re not investing roughly $200 billion in capex in 2026 on a hunch,” Jassy wrote. He added that Amazon has acquired buyer commitments for “a considerable portion” of that spend and expects to monetize most of it subsequent yr and in 2028.

Amazon’s customized chip enterprise, which incorporates Graviton processors, Trainium AI chips and Nitro structure, has notched an annual income run charge of greater than $20 billion, and is “rising triple digit percentages” yr over yr, Jassy mentioned.

Jassy, who grew to become CEO in 2021 when founder Jeff Bezos stepped down, referred to as again to his predecessor’s message to Wall Street a long time earlier, when Amazon remained unprofitable for a few years.

Bezos argued that long-term development was extra vital than short-term income, testing buyers’ endurance. Within the course of, Amazon invested important sums in cloud computing, warehouses and gadgets.

Jassy mentioned Amazon is seizing on alternatives that would grow to be huge “pillars,” or development engines, for the corporate over time. He pointed to the chips enterprise, which is “on fireplace,” and highlighted development in its grocery unit, speedy supply service and nascent Leo satellite tv for pc web providing.

“We’re keen to make massive capex investments and endure short-term FCF headwinds for the substantial medium to long-term FCF surplus,” Jassy mentioned.