Amazon (AMZN.US) CEO: AWS cloud computing capacity has been sold out until 2027 2028, and a large amount of production capacity has been promised to be reserved by customers
The Zhitong Finance App learned that Amazon (AMZN.US) CEO Andy Jasi said on Friday that as demand for artificial intelligence (AI) infrastructure continues to grow, Amazon's AWS cloud computing capacity has basically been sold out until 2027, and a large amount of production capacity has already been promised to be reserved by customers in 2028. In a video podcast, Jia Xi said that in the face of the never-ending demand from AI laboratories and enterprise customers, Amazon is trying to keep up with the growth rate of market demand.
Earlier this year, Amazon said it plans to invest around US$220 billion in capital expenditure in 2026. Jia Xi said that considering that cloud computing capacity has been sold out in 2026, the company “can totally invest more money, and this is not an unwise use of capital.”
He said, “Production capacity for 2027 has almost been sold out. We always reserve a certain amount of production capacity to meet on-demand usage needs and use it for our inference services Bedrock or EC2, but all large volumes of production capacity have basically been sold out. A significant portion of production capacity has already been sold in 2028.” EC2 is an AWS service that provides cloud servers for running applications; Bedrock allows customers to access various AI models to build generative AI applications.
Deutsche Bank looks ahead to Amazon's Q3 performance: raise the AWS growth rate and expect next year's expenses to rise to US$330 billion
Amazon plans to announce third-quarter results on October 29th. Deutsche Bank released Amazon's third-quarter performance forecast on October 20. It is expected that demand for the AWS cloud business will increase, the advertising business will be steady, and e-commerce indicators will pick up after a wrong period of promotion activities, which will support the company to hand over a report card close to the upper limit of the revenue guidelines. The bank maintains a “buy” rating and a target price of $325.
In its report, Deutsche Bank viewed AWS as an important source for improving future performance forecasts. However, the improvement in growth expectations is also accompanied by higher investment: Deutsche Bank raised Amazon's 2027 capital expenditure forecast to about US$330 billion, which is higher than the agreed market expectation of about US$290 billion.
Based on AWS, advertising and retail business surveys, Deutsche Bank expects Amazon's total revenue for the third quarter to be about US$202.8 billion, close to the upper limit of the company's guidance; operating profit of about US$26.9 billion, 1.4% higher than the guidance limit and 3.5% higher than the market consensus; and earnings per share of about 2.05 US dollars, which is about 4.7% higher than the market consensus.
Deutsche Bank raised the year-on-year growth forecast for AWS revenue for the third quarter from 40% to 41%, up from 37% in the second quarter. This acceleration occurred against the backdrop that the year-on-year comparison base was about 2.8 percentage points higher than in the second quarter. The bank expects the growth rate to rise further to 44% in the fourth quarter.
Corresponding to revenue forecasts, the third quarter was about 46.5 billion US dollars and the fourth quarter was about 51.1 billion US dollars, which were about 2% and 4% higher than market consensus, respectively. However, Deutsche Bank also warned that buyers' expectations for the AWS growth rate in the third quarter were close to 42%, higher than the bank's own forecast of 41%.
In terms of profit margins, Deutsche Bank expects AWS's operating profit margin for the third quarter to be 37.1%, up from 34.6% in the same period last year; 38.1% for the fourth quarter, up from 35% in the same period last year. Excluding one-time revenue of US$600 million in the second quarter, the profit margin was approximately 37.9%, compared to 32.9% for the same period last year.
The improvement in demand is reflected in both committed spending and actual consumption. According to an exchange between Deutsche Bank and Aran Khanna, co-founder and CEO of cloud cost management company Archera, from June to September, the growth rate of customer promised spending over the next 12 months increased from 35% to nearly 38%, and the actual usage growth rate increased from 38% to 40%. The former reflects future demand commitments, while the latter is closer to ongoing business consumption. Both are simultaneously accelerating to support revenue growth.
Computing power capacity is still a bottleneck! Billions of dollars of chips piled up in warehouses due to lack of electricity
The bottleneck is still computing power capacity. According to Amazon's latest internal documents and an employee meeting recording obtained by Business Insider, Amazon AWS is temporarily storing the Nvidia GB300 rack in an “intermediate warehouse” because the target data center “has room for more racks, but there is not enough available electricity to power it up.”
According to internal emails, Amazon is expected to receive about 5 billion US dollars of GB300 racks in August alone, and will continue to receive about 3 billion US dollars every month thereafter, maintaining this pace “for the foreseeable future.”
AWS Chief Financial Officer John Felton quipped to Prasad Kalyanaraman, an executive responsible for AI infrastructure construction, at an internal staff meeting in September: “Congratulations on turning our company's free cash flow negative.” Prasad Kalyanaraman did not refute this and stated that the company's free cash flow is expected to continue to be negative “for the next few years or so.” It is worth mentioning that in July of this year, when Amazon announced its second-quarter earnings report, its rolling free cash flow had clearly turned negative, to negative 7.6 billion US dollars, for the first time in many years.
The impact of this situation on the market is already evident. Chips left idle in warehouses are unable to generate any computing power supply, causing online computing power to continue to be scarce, and GPU rental prices remain high, creating a typical inflationary bottleneck — large amounts of capital, labor, and energy are consumed ahead of schedule, while output is delayed for months or even years.
The root cause of the chip backlog is a serious lag in the power infrastructure. Prasad Kalyanaraman revealed at an internal meeting that Amazon had to fund the construction of workers' accommodation areas in West Texas due to a shortage of plumbers and electricians, so construction workers can live there for two to three years before the project is completed.
Prasad Kalyanaraman also revealed that Amazon promised Jasi in 2023 that AWS would get out of the tight production capacity situation by 2027. Today, Amazon expects demand to still exceed available capacity in 2027.
Channel feedback shows that AWS is phasing in inference production capacity to absorb the backlog of customer demand, but like its peers, it still faces obvious capacity constraints. In a situation where resources are tight, AWS is allegedly pushing customers requiring GPU resources to sign procurement agreements with wider coverage and longer terms, and use its self-developed computing and network hardware where applicable.