Amazon’s Andy Jassy Just Made a Startling Prediction.
Key Points
Amazon Web Services, the cloud business, has reached a $169 billion annual revenue run rate.
Customers are rushing to AWS for AI and non-AI products and services.
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Amazon (NASDAQ:AMZN) has seen earnings climb over the years as it built its e-commerce empire. Shoppers around the world turn to their local Amazon websites for essentials and general merchandise, and the company's Prime membership program offers them fast delivery and other advantages that keep them coming back. In the U.S., Amazon has also expanded into healthcare, with pharmacy services and a telehealth and primary care network.
On top of this, Amazon's venture into cloud computing has supercharged growth, with Amazon Web Services (AWS) serving as the company's main profit driver. AWS is the world's No. 1 cloud services provider, and the artificial intelligence (AI) boom has created enormous demand for this business. In fact, Amazon chief Andy Jassy just made a startling prediction. Let's check it out.
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Image source: Amazon.
AWS' role in AI
We'll start by taking a close look at AWS' role in the AI landscape and beyond. This cloud computing giant offers its customers a broad range of products and services, from access to Nvidia's leading graphics processing units (GPUs) to Amazon's own variety of in-house-designed chips. Customers also can turn to AWS for large language models, agentic AI, and much more.
AWS is seeing demand for both its non-AI and AI products and services, a positive point as this shows the business doesn't rely uniquely on one area. But AI clearly has offered growth a significant push. For example, AWS' annual revenue run rate reached $58 million three years after the service launched; AWS' AI revenue run rate as of the recent quarter, about three years into the AI boom, totals more than $25 billion.
This, as well as the demand AWS is seeing for this year through at least 2028, has prompted Amazon to increase its levels of capital spending to build out infrastructure. The company said it now plans to spend $220 billion this year, up from an earlier forecast of $200 billion. And even with this level of spending, Amazon says it won't be able to fulfill all of the demand this year and next year.
Now, let's consider chief Andy Jassy's startling prediction.
"We long believed AWS could become a few hundred billion-dollar revenue business, and now believe it'll be at least double that, and very possibly be a trillion-dollar annual revenue business for us in time," Jassy said during the company's recent earnings call.
The early stage of AI usage
Some investors have worried about the spending levels of Amazon and other tech giants in this AI boom, but if Amazon is right, the spending of billions today could equal trillions in revenue down the road. So far, the levels of demand support Amazon's ambitions. And here's another point that should reinforce optimism: We're in the early stages of the actual use of AI by individuals and companies across industries, and this suggests that a lot more growth may be on the horizon. AI products and services aren't just used in the development of AI, but are needed for AI to function, and this equals ongoing revenue for cloud service providers.
So, Jassy's prediction is startling because, considering AWS' current $169 billion annual revenue run rate, reaching $1 trillion or more represents a huge jump. That said, if the current momentum continues, trillion-dollar revenue seems very possible down the road -- particularly if the usage of AI becomes widespread.
What does all of this mean for you as an investor? Amazon represents a great way to bet on AI, while still offering yourself a certain degree of safety. Though the company is investing heavily in AI, as I mentioned earlier, it doesn't depend uniquely on this area.
Amazon said in its earnings call that AWS is seeing "strong growth" across AI and non-AI businesses. And the company can also count on its e-commerce operation for growth, too. It's demonstrated the performance of this business model over time, growing revenue, profit, and return on invested capital.
All of this means that Amazon makes a great stock to own -- and Jassy's recent prediction sweetens the deal.
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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
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