Key insights
- Amazon's CEO letter highlights significant growth in AWS, particularly in AI, and custom silicon, projecting substantial future free cash flow. Strong growth in retail and expansion of the satellite internet business are also noted. Increased capital expenditure in the short term is expected to yield a large FCF surplus in 2027 and beyond, suggesting a bullish outlook for AMZN and potentially the broader tech sector.
Key takeways from Amazon CEO's letter to shareholders
Retail
- Amazon retail is a $600B business, but 80% of global retail is still physical. * Amazon is now the 2nd largest grocer in the U.S., with $150B grocery sales in 2025. * Since adding perishables to the Same-Day network, sales in that category have grown 40x. * Over 1 million robots in fulfillment centers. * $4B+ committed to expand rural delivery network.
AWS * AWS is at a $142B run rate, but 85% of global IT spend is still on-premises. * AWS AI annual revenue run rate hit $15B in Q1 2026. * The AWS Bedrock team rebuilt its inference engine (called "Mantle") in just 76 days. This new engine processed more tokens in Q1 2026 than in all prior years combined. * Added 3.9 GW power capacity in 2025 with plan to double capacity by end of 2027. * Management is intentionally leaning into heavy Capex now, even with short-term FCF headwinds to secure a massive FCF surplus in 2027 and beyond.
Custom Silicon * Custom chip business (Graviton, Trainium, Nitro) is now $20B+ annual revenue run rate, growing triple digits YoY. * Trainium3 is shipping now (30-40% better price performance than Trainium2) and is nearly fully subscribed. * Trainium4 reservations rolling in despite being 18 months away. * Custom chips are expected to save tens of billions in Capex and add several hundred basis points to operating margins vs buying third-party chips.
Satellite Internet * Amazon Leo is now the 3rd largest low earth orbit network with over 200 satellites and thousands more launching soon. * Customers include Delta Airlines, AT&T, Vodafone, NASA and the Australian National Broadband Network.
https://www.aboutamazon.com/news/company-news/amazon-ceo-andy-jassy-2025-letter-to-shareholders
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Position: Long AMZN (since 2021). NFA.