But after posting a record-breaking $20 billion in profits during the fourth quarter of 2024 alone, almost double its $10.6 billion from the same quarter the prior year, Amazon is once again looking like the version of itself that many of its rivals should fear. And with that profit engine revved up and feeding an enormous cash buffer, Amazon CEO Andy Jassy is doubling down in the industry’s AI infrastructure arms race.

Jassy told analysts on an earnings call Thursday that Amazon will spend around $100 billion or more on capital expenses in 2025, up at least 20% from 2024. The “vast majority” of this year’s capex will go toward supporting Amazon’s broad and deep investments into artificial intelligence infrastructure as the tech giant competes for what Jassy called “probably the biggest technology shift and opportunity since the internet.”

The massive capex comes as Amazon’s cloud and AI rivals up their spending. Google parent company Alphabet said on its most recent earnings call that it expects to spend $75 billion on capital expenses in 2025.

This comfortably profitable version of Amazon is powered by strong margins in the various businesses it has built alongside its online retail empire. The fast-growing AWS cloud computing business posted a healthy operating profit margin of 37% in the fourth quarter—or $10.6 billion—on revenue of $28.8 billion.

Amazon’s ad business has also helped bolster the company’s bottom line. Analysts estimate the ad business carries an even better profit-margin profile than the cloud-computing arm (Amazon does not break out profit details for the ad business). Amazon’s most popular type of ads, called sponsored product ads and difficult to distinguish from regular merchandise listings, increasingly blanket the search results that users see when they look up a product on the site. And Amazon has aggressively pursued big brand TV advertising budgets over the past year, selling video ads in its Prime video streaming division.

And keeping a tight lid on costs hasn’t hurt. Amazon’s operating expenses grew only 6% in the full year 2024, even as its total revenue increased 11%.

Feeding the flywheel

Overall, Amazon’s revenue grew 10% year over year in the fourth quarter to more than $187 billion, in line with analyst expectations, and likely marking the first time the company has surpassed its retail rival Walmart in quarterly sales. (Walmart reports earnings latest this month, but is expected by analysts to generate around $180 billion in quarterly revenue. It’s also worth noting the comparison is not exactly apples to apples, as Amazon’s cloud business generates 15% to %17 of overall revenue without a similar offering from Walmart.) The tech giant’s quarterly net profit of $20 billion, marked a 88% increase over the same quarter in 2023.

Amazon’s Jassy also said the company continues to cut its costs per shopping order thanks to a restructured warehouse network that is storing items closer to customer doors, which both increases speed of delivery while lowering transportation costs—creating a lucrative flywheel for the company. Jassy said that Amazon’s cost per unit to deliver merchandise shrunk worldwide for the second year in a row. Amazon’s profits increased in the fourth quarter for both its core North America and international consumer divisions, which include both the e-commerce and advertising businesses, marking the eighth straight quarter of such gains.

Despite the strong performance in the last three months of 2024, Amazon’s stock dropped around 4% in after-hours trading with investors expressing concern over the company’s first-quarter guidance, which came in below analyst estimates on both revenue and profitability. Amazon executives blamed “unusually large” foreign exchange rate impacts and the fact that the first quarter of 2024 included an extra day of sales owing to it being a Leap Year. It’s fair to wonder if Amazon leaders could also be guarding against the uncertainty of President Donald Trump’s newly announced tariffs on China, where many products sold on Amazon are made, but analysts did not ask about this topic on the company’s earnings call. An Amazon spokesperson declined to comment on whether tariff concerns played a role in the company’s first-quarter projections.

Either way, the real story continues to be Amazon’s massive bet that generative AI experiences will increasingly become embedded across applications in nearly every sector, and that AWS—from offering its own chips, to its own proprietary AI models, to a marketplace that sells access to more than 100 other models—will power a massive piece of this transformation.

The recent industry craze over DeepSeek, which released a powerful AI model called R1 and which claimed comparably low costs to create it, spooked some investors who worried that AI tech giants like Amazon were overspending on AI. But on the company’s earnings call, Jassy made the case to analysts that inevitable decrease in costs to train and run AI models in the future should lead to an explosion of corporate use cases that will spur an increase in overall customer spending.

“I think it will make it much easier for companies to infuse all their applications with inference and generative AI,” he said.