Amazon Web Services delivered 28% year-over-year revenue growth in the first quarter of 2026, maintaining its position as a leading cloud provider but lagging behind Alphabet’s 63% and Microsoft’s 40% growth rates. The slower pace raises questions about competitive pricing and demand dynamics as enterprise AI adoption evolves.

Cloud service providers are on track to spend roughly US$700 billion on AI infrastructure by the end of 2026, driven by record investments in data centers, networking, and specialized hardware. Memory chip prices have surged 50% year-to-date, while timing for delivery of custom ASICs remains uncertain, pressuring capex forecasts.

Amazon is evaluating spinning off its custom Graviton and Trainium processors into an external business unit, leveraging a current $20 billion internal run rate. The move aims to capture additional market share in AI chips, with ambitions to generate up to $50 billion in annual external revenue once production capacity scales beyond AWS needs.