Amazon Pledges $26B Quarterly for GenAI and Retail Overhaul

Amazon continues its push into artificial intelligence (AI) and robotics, signaling a shift in its retail and technology business strategies.

CEO Andy Jassy described AI Thursday (Feb. 6) as “the biggest opportunity since cloud and probably the biggest technology shift and opportunity in business since the internet.” The company is doubling down on AI investments, with a $26 billion capital expenditure for Q4 2024 dedicated to developing AI capabilities for Amazon Web Services (AWS), a level of spending expected to remain consistent throughout 2025.

“For those of us who are building frontier models, we’re all working on the same types of things, and we’re all learning from one another,” Jassy said in answer to a recent analyst question about his impressions of DeepSeek. “I think you have seen and will continue to see a lot of leapfrogging between us. There is a lot of innovation to come. And if you run a business like AWS, you have a core belief that we do that, virtually, all the big, generative AI apps will use multiple model types. Different customers will use different models for different types of workloads.”

Jassy’s comments came during Amazon’s Q4 earnings call. A key focus of Amazon’s AI strategy is the development of its second-generation Tranium AI chips, which are now in use by partners like Anthropic. Jassy emphasized the importance of generative AI (GenAI) across Amazon’s ecosystem, including its eCommerce operations. He highlighted the role of Rufus, Amazon’s shopping AI agent, in enhancing customer experience and predicted increasing competition in this space. Rufus, he noted, continues to improve monthly, influencing how customers interact with Amazon’s platforms.

Jassy discussed Amazon‘s continued investment in robotics, noting that the company has already seen cost savings, productivity improvements, and safety improvements from robotics integration in its fulfillment network. He highlighted that the latest robotics initiatives have begun to hit production, with a comprehensive implementation in the Shreveport facility showing encouraging results in speed, productivity and cost to serve. These new robotics initiatives are planned for expansion to other facilities, both new and retrofitted. Jassy emphasized that this is an ongoing, multi-year effort, with future waves of robotics innovations in development to further improve productivity, cost, and safety across the fulfillment network. He also noted that the brains of many of their robots use generative AI.

Jassy commented on the importance of delivery speed, noting that Amazon carefully measures conversion rates of product detail pages with faster delivery promises versus slower ones. He also stated that they monitor customer behavior after a purchase with a fast delivery promise to track what they buy throughout the year. According to Jassy, Amazon has not seen diminishing returns in its ability to improve delivery speed. While some customers may choose slower delivery options, customers tend to buy more frequently when faster delivery is available. Jassy highlighted the impact of faster delivery on everyday essential purchases and the pharmacy business, with same-day delivery options increasing customer usage.

Earnings Overview

Despite these technological advancements, Amazon’s Q1 2025 guidance reflected caution. The company projected revenue between $151 billion and $155.5 billion, below analysts’ expectations of $158 billion, citing factors like foreign exchange headwinds and soft consumer demand. Operating income for Q1 is expected to range from $14 billion to $18 billion, potentially falling below last year’s $15.3 billion if it hits the lower end of the estimate.

Amazon’s Q4 2024 results were more optimistic, with net sales rising 10% year-over-year to $187.8 billion and operating income surging 60% to $21.2 billion. AWS played a pivotal role, with a 19% increase in sales contributing substantially to overall profitability. However, investor sentiment remained mixed due to concerns about slowing growth and rising capital expenditures tied to AI initiatives.