Amazon.com says ‘continue to be confident’ in long-term capex

CEO Jassy says: “We continue to be confident in the long-term CapEx investments we’re making on the AWS CapEx. We intend to spend in 2026, much of which will be installed in future years. We have high confidence this will be monetized well, as we already have customer commitments for a substantial portion of it, and that it will yield compelling operating margins and ROIC. The faster AWS grows, the more short-term CapEx will spend. AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetize it. Typically 6 to 24 months before we start building customers, depending on the component. However, these CapEx investments fund assets with many year useful lives, 30 plus years for data centers, 5 to 6 years for chips, servers, and networking gear. The free cash flow in ROIC for these investments are cumulatively quite attractive a couple of years after being in service. However, in times of very high growth, like now, where the CapEx growth meaningfully outpaces the revenue growth, the early years free cash flow is challenged. Until these initial tranches of capacity are being monetized and revenue growth outpaces CapEx growth.” Comments taken from Q1 earnings conference call.

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