Amazon projects doubling AWS capacity by 2027 as Trainium drives 150% quarterly revenue growth

Earnings Call Insights: Amazon.com, Inc. (AMZN) Q3 2025

MANAGEMENT VIEW

* CEO Andrew Jassy reported strong growth across Amazon's business for the quarter, citing $180.2 billion in revenue, a 12% year-over-year increase excluding foreign exchange rates. Operating income reached $17.4 billion, but Jassy noted it "would have been over $21 billion, if not for 2 special Q3 expenses, $2.5 billion for an FTC settlement and $1.8 billion for estimated severance costs." He highlighted AWS's reacceleration to 20.2% year-over-year growth and a backlog rise to $200 billion, adding that "AWS is gaining momentum. Customers want to be running their core and AI workloads in AWS given its stronger functionality, security and operational performance."
* Jassy detailed advancements in AWS AI infrastructure, citing the launch of Strands and AgentCore to simplify agent creation and deployment. He stated, "AgentCore's SDK has already been downloaded over 1 million times." Project Rainier, Amazon's AI compute cluster, now includes nearly 500,000 Trainium2 chips and is expected to surpass 1 million by year-end. Jassy explained, "Trainium is being used by a small number of very large customers but we expect to accommodate more customers starting with Trainium3."
* On the retail side, Jassy announced a 14% increase in selection since last quarter and ongoing expansion in grocery delivery, now serving more than 1,000 cities and towns with same-day delivery for fresh groceries. He described this as a "game changer for customers who can now order milk alongside electronics."
* Jassy also noted growth in Amazon Ads, which reached $17.6 billion in revenue for the quarter, and discussed new partnerships with Netflix, Spotify, and SiriusXM. He highlighted increased engagement with Alexa+, stating "Alexa+ customers are talking to Alexa 2x more" than before.
* CFO Brian Olsavsky reported, "Worldwide revenue was $180.2 billion, a 12% increase year-over-year, excluding a 90 basis point favorable impact of foreign exchange." He added, "Operating income includes 2 special charges, which reduced operating income by $4.3 billion" and clarified that excluding these charges, operating income would have been $21.7 billion. Olsavsky also highlighted, "Worldwide third-party seller unit mix was 62%, up 200 basis points from Q3 of last year."

OUTLOOK

* Management expects to remain "very aggressive in investing in capacity because we see the demand" for AWS and AI infrastructure. Jassy stated, "We're now double the power capacity that AWS was in 2022, and we're on track to double again by 2027."
* Olsavsky projected full year cash CapEx to be "approximately $125 billion in 2025," with expectations for an increase in 2026. He stated, "We expect our full year cash CapEx to be approximately $125 billion in 2025, and we expect that amount will increase in 2026."

FINANCIAL RESULTS

* Amazon reported $180.2 billion in worldwide revenue for Q3, with North America revenue at $106.3 billion and International at $40.9 billion. AWS revenue was $33 billion, up 20.2% year-over-year, with an annualized run rate of $132 billion. Operating income for AWS was $11.4 billion. Trailing 12-month free cash flow was $14.8 billion.
* Advertising revenue was $17.7 billion, growing 22% year-over-year. Special charges of $2.5 billion for an FTC settlement and $1.8 billion for severance reduced reported operating income. Net income included a pretax gain of $9.5 billion related to an investment in Anthroopic.
* Olsavsky explained, "North America segment operating income was $4.8 billion, with an operating margin of 4.5%. Excluding the $2.5 billion charge related to the legal settlement, North America segment operating income would have been $7.3 billion."

Q&A

* Justin Post, BofA Securities: Asked about AWS capacity and Trainium demand outside major customers. Jassy responded, "We brought in quite a bit of capacity...3.8 gigawatts in the last year with another gigawatt plus coming in the fourth quarter...Trainium2 is really doing well. It's fully subscribed...It grew 150% quarter-over-quarter in revenue."
* Brian Nowak, Morgan Stanley: Inquired about Trainium3's hurdles. Jassy explained, "We're always going to have multiple chip options...Trainium3 will be about 40% better than Trainium2 and Trainium2 is already very advantaged on price performance."
* Mark Mahaney, Evercore ISI: Asked about groceries and headcount. Jassy described the grocery business as "over $100 billion of gross merchandising sales" in the past 12 months and said, "We're on to something very significant with what we're doing with perishables from our same-day facilities." On headcount, Jassy clarified, "The announcement...was not really financially driven and it's not even really AI-driven, not right now, at least. It really -- its culture."
* Eric Sheridan, Goldman Sachs: Asked about robotics and automation. Jassy stated, "Robotics is a very substantial area of investment for us. We have over 1 million robots in our fulfillment network at this point."
* John Blackledge, TD Cowen: Asked about agentic commerce. Jassy shared optimism for agentic commerce, highlighting Rufus and Buy for Me as key initiatives.
* Colin Sebastian, Baird: Inquired about AWS acceleration and advertising. Jassy emphasized, "We see the growth in both our AI area...Bedrock continues to grow really quickly. SageMaker continues to grow quickly."

SENTIMENT ANALYSIS

* Analysts focused on AWS growth drivers, capacity, Trainium demand, and the scale of AI investments, frequently pressing for more detail on adoption and differentiation. The tone was neutral to slightly positive, with skepticism on capacity constraints and competitive positioning.
* Management maintained a confident tone, particularly in prepared remarks, highlighting aggressive investment and innovation. During Q&A, Jassy was direct but occasionally emphasized the ongoing nature of several initiatives, using phrases such as "we have to, of course, deliver the chip" and "we're on to something very significant."
* Compared to the previous quarter, management's tone was more assertive about AWS's momentum and infrastructure expansion, while analysts remained focused on execution and competitive dynamics.

QUARTER-OVER-QUARTER COMPARISON

* Revenue increased from $167.7 billion in Q2 to $180.2 billion in Q3. AWS growth accelerated from 17.5% to 20.2% year-over-year. AWS backlog rose from $195 billion to $200 billion. Special charges for legal settlement and severance impacted Q3 operating income, in contrast to Q2.
* Management shifted emphasis from expanding perishable grocery pilots and robotics in Q2 to a broader focus on aggressive AWS capacity investment and Trainium adoption in Q3. Analysts in both quarters pressed on AWS growth, capacity, and AI, but Q3 saw more detailed discussion on custom silicon and agentic commerce.
* The outlook language strengthened, with management projecting continued aggressive investment through 2027. Confidence in AI infrastructure and retail innovation was pronounced compared to the previous quarter.

RISKS AND CONCERNS

* Management cited unpredictability in demand, foreign exchange rates, economic conditions, and legal or regulatory matters. Special charges for an FTC settlement and severance were highlighted as material impacts this quarter.
* Capacity constraints, particularly in power and chips, were acknowledged, with Jassy noting, "maybe the bottleneck is power. I think at some point, it may move to chips, but we're bringing in quite a bit of capacity."
* Analysts raised concerns about AWS's ability to meet surging demand and Trainium's adoption outside a limited customer base. Management pointed to ongoing infrastructure investment and software ecosystem improvements as mitigation strategies.

FINAL TAKEAWAY

Amazon's Q3 2025 earnings call spotlighted accelerating AWS growth, fueled by robust demand for AI and custom silicon, alongside aggressive infrastructure expansion that is projected to double AWS power capacity by 2027. Despite special charges impacting operating income, management emphasized continued investment in AI, cloud, and retail innovation, with strong momentum in advertising and new product offerings as key drivers for future growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/amzn/earnings/transcripts]

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