Amazon’s $50B Chip Unit Sells Out Trainium2, Boosts AWS Margins
NFLX•Amazon’s in-house chip unit reached a $50 billion annual run rate, deploying Graviton to 98% of the top 1,000 EC2 customers and selling out Trainium2 with Trainium3 nearly fully subscribed. Custom silicon should save tens of billions in annual CapEx and boost AWS margins by several hundred basis points.
1. Rapid Growth of In-House Chip Unit
Amazon’s custom silicon division has achieved a $50 billion annual revenue run rate, with Graviton processors now used by 98% of the top 1,000 EC2 customers. Its Trainium2 AI chips have sold out, and Trainium3 subscriptions are nearly at capacity, underscoring strong internal and external demand.
2. Significant Cost Savings and Margin Gains
Management projects that these custom chips will deliver several hundred basis points of operating margin advantage for AWS. At scale, Trainium deployments are expected to save tens of billions of dollars in annual capital expenditures, directly improving profitability.
3. AWS Scale and Profitability Trends
AWS is on a $150 billion annualized revenue run rate and recently posted a record 13.1% operating margin in the first quarter. Year-over-year revenue growth accelerated to 28%, marking the division’s fastest expansion in 15 quarters.
4. Outlook and Key Metrics to Watch
Investors should monitor upcoming quarterly results for AWS operating income and margin stability. Further production ramps of Trainium3 and additional Graviton deployments will be critical indicators of sustained cost efficiencies and margin expansion.
