Amazon’s Big AI Bet Pays Off with OpenAI Deal and AWS Growth

Amazon’s latest earnings report gave investors exactly what they wanted: proof that its massive AI bets are starting to pay off.

The highlight was a new seven year, $38 billion deal with OpenAI, which cements AWS’s position as a top tier provider of AI infrastructure and marks a major win after Microsoft’s Azure lost its exclusivity on OpenAI workloads

AWS: Back in the Driver’s Seat
Amazon Web Services grew 20% year over year to $33 billion, its fastest rate in nearly three years. The growth reflects strong demand for AI training and inference workloads, along with improved chip design and data center capacity.

While AWS still trails Azure and Google Cloud in percentage growth, it leads by a wide margin in absolute revenue showing that AWS remains the backbone of the cloud market. CEO Andy Jassy’s confidence was clear when he said Amazon plans to “keep investing aggressively” as long as demand justifies it.

Core Retail Stays Steady
Outside of AWS, Amazon’s retail business held firm. Online sales climbed 10%, and international revenue rose 14%, suggesting that consumers continue to value convenience and Prime benefits even amid inflation pressures. Third-party seller services and advertising both higher-margin segments kept driving profitability. Ad revenue jumped 24% to $17.7 billion, outpacing key rivals and strengthening Amazon’s growing role in connected TV and digital marketing.

Spending Heavily, but Strategically
The one downside in the report was free cash flow, which fell sharply as capital expenditures soared to $116 billion on a trailing twelve-month basis. Most of that is going into data centers and AI infrastructure to support future growth. It’s a bold bet: Amazon is effectively trading near-term cash flow for long-term dominance in cloud and AI computing.

Margins Hold Firm
Despite heavy investment, operating margins remained stable at around 10%, supported by the higher-margin ad business and operational efficiencies in retail. Adjusted for one-time costs, operating income would have been even stronger.

For the next quarter, Amazon expects revenue between $206 and $213 billion and operating income up to $26 billion steady guidance that reflects confidence without overpromising.

The OpenAI deal could be the beginning of a broader wave of enterprise AI partnerships that lean on AWS’s scale

Amazon has managed to turn skepticism about its slowing cloud growth into renewed optimism. Between the OpenAI partnership, accelerating AWS momentum, and consistent retail performance, the company appears well positioned for the next phase of AI driven expansion.

The heavy capital spending may pressure cash flow now, but it signals a company preparing not just to participate in the AI era but to help define it..