AWS Accelerates to 20% Revenue Growth as AI Projects Drive Cloud Spending Shift

• Amazon Web Services generated $33 billion in cloud revenue during the third quarter of 2025, representing a 20% increase from the same period a year earlier, according to earnings disclosed Thursday for the quarter that ended September 30. This result substantially outpaced Google Cloud's approximately $15 billion in quarterly revenue announced this week, though Microsoft's cloud revenue of $49 billion for its first quarter of fiscal 2026, reported Wednesday, remained larger.
• Operating profit for AWS reached $11.4 billion, up from $10.4 billion in the prior year. Amazon noted that severance expenses tied to workforce reductions were factored into third-quarter results.
• "We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business," stated Amazon President and CEO Andy Jassy in the earnings announcement. "AWS is growing at a pace we haven't seen since 2022."

Strategic Implications

The acceleration in AWS revenue arrives during a period when chief information officers are prioritizing cloud infrastructure optimization and expenditure management, suggesting that IT departments may be reallocating their spending strategies.

AWS demonstrated 17.5% cloud revenue growth in the second quarter, which reflected IT leaders reducing cloud expenses, according to Nick Patience, vice president and practice lead of AI platforms at the Futurum Group. The stronger 20% expansion in the third quarter could signal that technology executives are transitioning away from cost reduction initiatives toward funding new generative AI deployments.

Patience characterized the higher sequential growth as "a strong sign that new generative AI projects are finally outpacing the broad-based cloud cost-cutting trend."

Infrastructure and Investment Plans

Amazon's capital expenditures totaled $34.2 billion during the third quarter, bringing cumulative spending to $89.9 billion through 2025. AWS accounts for a substantial portion of this investment, directed toward meeting AI demand and supporting core infrastructure, including the company's proprietary Trainium AI chip, according to Brian Olsavsky, Amazon Senior Vice President and Chief Financial Officer, during the third-quarter earnings call. The custom chip division achieved 150% growth on a quarter-over-quarter basis.

Olsavsky projected that total cash capital expenditures for the full year 2025 would reach $125 billion and indicated further increases anticipated for 2026. This revised forecast surpasses Amazon's earlier guidance of $100 billion.

"We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term," Olsavsky stated, per a Seeking Alpha transcript.

AWS's committed contract backlog expanded to $200 billion by the conclusion of the third quarter, with certain undisclosed agreements still in negotiation, Jassy reported.

The company is simultaneously ramping up infrastructure capacity in response to surging AI demand. Over the preceding twelve months, Amazon added 3.8 gigawatts of power generation capacity. Jassy noted that AWS has increased its power infrastructure by a factor of two since 2022 and expects to achieve another doubling by 2027.

"You're going to see us continue to be very aggressive in investing in capacity because we see the demand," Jassy remarked.

Market Assessment

The third quarter represents a turning point in how the market perceives Amazon's cloud and AI strategy, demonstrating the company's commitment to merging cloud infrastructure with artificial intelligence through capacity investments, proprietary hardware development, and AI-integrated service offerings, according to Jim Hare, Distinguished Vice President Analyst at Gartner. Nevertheless, Hare cautioned that the "story ahead still has many moving parts."

"The big question going forward is can the company sustain or accelerate this growth converting its massive infrastructure build out into higher margin revenue and outperform, or at least keep up, with other hyperscalers in the AI-driven cloud," Hare wrote in correspondence with Fathom Tech.