Amazon.com, Inc. (AMZN.US) CEO: AWS cloud computing capacity is sold out through 2027, and a substantial amount of 2028 capacity has already been committed and reserved by customers.

Amazon.com, Inc. (AMZN.US) CEO Andy Jassy said on Friday that with growing demand for artificial intelligence (AI) infrastructure, Amazon.com, Inc.'s AWS cloud computing capacity is essentially sold out through 2027, and a substantial amount of 2028 capacity has already been committed and reserved by customers. Speaking on a video podcast, Jassy said that in the face of endless demand from AI labs and enterprise customers, Amazon.com, Inc. is working hard to catch up with the pace of market demand growth. Earlier this year, Amazon.com, Inc. said it planned to invest about $220 billion in capital expenditure in 2026. Jassy said that given that 2026 cloud computing capacity is already sold out, the company "could absolutely invest more money, and it would not be an unwise use of capital." He said: "2027 capacity is basically sold out. We always reserve a certain amount of capacity to meet on-demand usage and for our inference service Bedrock or EC2, but all the large-volume capacity is basically sold out. A considerable portion of 2028 capacity has also been sold." EC2 is an AWS service that provides cloud servers for running applications; Bedrock gives customers access to various AI models to build generative AI applications. Deutsche Bank previews Amazon.com, Inc. Q3 results: raises AWS growth forecast; next year's spending may rise to $330 billion Amazon.com, Inc. plans to report third-quarter results on October 29. Deutsche Bank Aktiengesellschaft released a third-quarter earnings preview for Amazon.com, Inc. on October 20, expecting stronger AWS cloud business demand, solid advertising business, and a recovery in e-commerce metrics after the shift in promotional event timing to support results close to the upper end of the company's revenue guidance. The bank maintained its "Buy" rating and $325 price target. In the report, Deutsche Bank views AWS as an important source of upward revisions to future performance forecasts. However, improved growth expectations come with higher investment: Deutsche Bank raised its 2027 capital expenditure forecast for Amazon.com, Inc. to about $330 billion, above the market consensus of about $290 billion. Based on surveys of AWS, advertising, and retail businesses, Deutsche Bank expects Amazon.com, Inc.'s third-quarter total revenue to be about $202.8 billion, close to the upper end of the company's guidance; operating profit of about $26.9 billion, 1.4% above the upper end of guidance and 3.5% above market consensus; and earnings per share of about $2.05, about 4.7% above market consensus. Deutsche Bank raised its third-quarter AWS revenue year-over-year growth forecast to 41% from 40%, above the 37% in the second quarter. This acceleration comes against a year-over-year comparison base about 2.8 percentage points higher than in the second quarter. The bank expects growth to rise further to 44% in the fourth quarter. Corresponding revenue forecasts are about $46.5 billion in the third quarter and about $51.1 billion in the fourth quarter, about 2% and 4% above market consensus, respectively. But Deutsche Bank also cautioned that buy-side expectations for third-quarter AWS growth are already close to 42%, above its own 41% forecast. On margins, Deutsche Bank expects AWS third-quarter operating margin of 37.1%, above 34.6% a year earlier; and 38.1% in the fourth quarter, above 35% a year earlier. After excluding a one-time $600 million gain in the second quarter, the margin was about 37.9%, compared with 32.9% a year earlier. Improved demand is reflected in both committed spending and actual consumption. According to Deutsche Bank's exchange with Aran Khanna, co-founder and CEO of cloud cost management company Archera, from June to September, the growth rate of customer committed spending for the next 12 months rose to nearly 38% from 35%, while the growth rate of actual usage rose to 40% from 38%. The former reflects future demand commitments, while the latter is closer to business consumption actually occurring; both accelerated in tandem, providing support for revenue growth. Computing capacity remains the bottleneck! Power shortage leaves billions of dollars of chips sitting in warehouses gathering dust The bottleneck remains computing capacity. According to internal Amazon.com, Inc. documents and a recording of an employee meeting recently obtained by Business Insider, AWS is temporarily storing NVIDIA Corporation GB300 racks in "intermediate warehouses" because the target data centers "have room for more racks but not enough available power to turn them on." Internal emails show that Amazon.com, Inc. alone expected to receive about $5 billion of GB300 racks in August and has continued to receive about $3 billion per month since then, maintaining that pace "for the foreseeable future." At an internal employee meeting in September, AWS Chief Financial Officer John Felton joked to Prasad Kalyanaraman, the executive responsible for AI infrastructure construction: "You made our company's free cash flow negative. Congratulations." Prasad Kalyanaraman did not dispute this and said the company's free cash flow is expected to remain negative "for the next few years or so." It is worth noting that in July this year, when Amazon.com, Inc. reported second-quarter results, its trailing free cash flow had already turned clearly negative, to negative $7.6 billion, the first time in years. The impact of this situation on the market is already evident. Idle chips in warehouses cannot generate any computing supply, causing online computing power to remain scarce and GPU rental prices to stay high, creating a typical inflationary bottlenecklarge amounts of capital, labor, and energy are consumed in advance, while output is delayed by months or even years. The root cause of the chip backlog lies in severe delays in power infrastructure. Prasad Kalyanaraman disclosed at the internal meeting that in West Texas, Amazon.com, Inc. had to fund the construction of worker housing due to a shortage of plumbers and electricians, so that construction workers could live on site for two or three years before the project was completed. Prasad Kalyanaraman also disclosed that Amazon.com, Inc. had promised Jassy in 2023 that AWS would emerge from capacity constraints by 2027. Now, Amazon.com, Inc. expects demand in 2027 to still exceed available capacity. Channel feedback shows that AWS is releasing inference capacity in phases to absorb pent-up customer demand, but like peers, it still faces obvious capacity constraints. Amid tight resources, AWS is reportedly pushing customers that need GPU resources to sign broader, longer-term procurement agreements and, where applicable, to use its self-developed computing and networking hardware.