"Amazon ( NASDAQ:AMZN ) is gearing up for massive investments in artificial intelligence (AI), with capital expenditures projected to exceed $100 billion in 2025. This surge focuses on bolstering AI capabilities, expanding Amazon Web Services (AWS), and building out data centers to handle growing computational demands. Historically, Amazon's capex spending has followed cyclical patterns, with periods of heavy investment followed by phases of consolidation and payoff."
"This heavy spending will likely pressure Amazon's financials in the coming quarters. Capital expenditures directly impact free cash flow (FCF), often turning it negative during peak investment phases. Amazon's recent financials show the e-commerce and cloud giant's adjusted FCF declining sharply, reflecting the weight of these outlays. In the second quarter, FCF was $18.2 billion on a trailing basis. That's a significant 66% drop from the $53 billion it reported a year ago, and it has been steadily falling all throughout the year."
Amazon plans massive capital expenditures exceeding $100 billion in 2025 to strengthen AI capabilities, expand Amazon Web Services (AWS), and build additional data centers for rising computational needs. Historical capex patterns show cycles of heavy investment followed by consolidation and payoff, and current indicators point to a new, potentially largest investment cycle centered on AI. The aggressive spending is expected to squeeze near-term profitability and free cash flow. Trailing adjusted FCF fell to $18.2 billion in Q2, a 66% decline from $53 billion a year earlier, while capex rose to about $107 billion versus $57.2 billion the prior year.
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