Amazon AWS Delivers 28% Growth and Eyes $50B Chip Spin-Off
AWS posted 28% revenue growth in Q1 2026 and generated 59% of Amazon’s income on 21% of sales, fueled by triple-digit custom AI chip growth with OpenAI/Anthropic. Amazon plans to spin off its $20 billion internal chip run rate into external sales, targeting up to a $50 billion market.
1. AWS Performance in Q1 2026
Amazon Web Services recorded a 28% year-over-year revenue increase in the first quarter of 2026 and accounted for 59% of the company’s operating income despite representing just 21% of total sales. This marks the division’s fastest growth rate and underscores its critical role in overall profitability.
2. Custom AI Chips Driving Growth
AWS’s custom AI chips achieved triple-digit revenue growth as Amazon secured major AI customers, including OpenAI and Anthropic. The outperformance of Graviton and Trainium chips has become a key differentiator in AWS’s infrastructure offerings.
3. Plans for Standalone Chip Business
Amazon is evaluating a standalone chip unit that would sell its Graviton and Trainium processors to third-party customers. With a $20 billion annual internal run rate, management projects external sales could expand to as much as $50 billion once production capacity is scaled.
4. Capital Expenditure and Cost Pressures
Amazon has earmarked $200 billion for capital expenditures in 2026, much of it for AI infrastructure. Rising memory chip prices—up about 50% this year—are pressuring component costs, prompting Amazon to balance aggressive spending with margin preservation.