Amazon Web Services (AWS) is facing significant capacity constraints in its data centers, limiting the cloud division’s potential growth amid surging AI demand, CEO Andy Jassy revealed at Amazon’s latest earnings call.
“It is true that we could be growing faster, if not for some of the constraints on capacity,” Jassy told analysts during the earnings call. The limitations stem from shortages of AI chips, server components like motherboards, and insufficient energy supply for data centers.
AWS reported fourth-quarter sales of $28.8 billion, marking a 19% increase but falling short of market expectations. Amazon’s stock declined approximately 4% in after-hours trading following lower-than-anticipated first-quarter guidance.
The capacity challenges echo similar concerns from competitors. Microsoft CFO Amy Hood recently acknowledged being in “a pretty constrained capacity place,” while Google executives reported ending 2024 with “more (AI) demand than capacity.”
Despite these constraints, Jassy remained optimistic about AWS’s AI business, which is tracking toward “multi-billion” dollars in annual revenue. He anticipates the supply constraints will “relax” in the second half of 2025.
To meet growing AI demand, Amazon has announced ambitious capital expenditure plans totaling $105 billion for 2025, primarily focused on data center expansion. This follows a record fourth-quarter spending of $26.3 billion.
“When AWS is expanding its capex, particularly what we think is one of these once-in-a-lifetime type of business opportunities like AI represents, I think it’s actually quite a good sign, medium to long term for the AWS business,” Jassy explained.
The substantial investment signals Amazon’s confidence in future demand, with Jassy noting that AWS doesn’t make such financial commitments without “significant signals of demand.”
