Amazon Faces Cloud Capacity Constraints Amid AI Push
Amazon.com warns of potential capacity limitations in its cloud computing business, despite plans to invest billions in data centers, chips, and AI services.
CEO Andy Jassy acknowledges that growth could be hampered by challenges in securing hardware and electricity. Amazon Web Services (AWS) faces limitations in bringing new data centers online due to power capacity and chip supply constraints.
Despite the challenges, AWS revenue increased 19% in the quarter ended December 31, maintaining a steady growth rate. However, analysts note that capacity constraints are limiting acceleration and mirroring similar limitations faced by rivals Google and Microsoft.
Amazon's investments in AI-related projects within AWS accounted for the majority of its capital expenditures of $26.3 billion in the last quarter of 2024. Operating income for the quarter ending in March is estimated at $14 billion to $18 billion, below analyst expectations.
While Amazon's holiday quarter performance was generally positive, investors expressed concerns over weaker first-quarter guidance due to currency fluctuations and the impact of the leap year in 2024.
Despite the challenges, Amazon remains focused on maintaining its edge in cloud computing and AI services. The company's overall revenue increased 10%, driven by growth in its e-commerce and logistics businesses.