AWS Trails Peers with 28% Growth as Chip Business Could Reach $50B
Amazon Web Services revenue grew 28% year-over-year in Q1 2026, trailing Google Cloud’s 63% and Microsoft Azure’s 40%, while memory chip prices have surged 50% year-to-date, driving higher infrastructure capex forecasts. Amazon is evaluating a standalone chip unit leveraging its Graviton and Trainium designs, which could boost revenue from the current $20B AWS internal run rate toward a potential $50B external sales opportunity.
1. AWS Growth Lagging Competitors
Amazon Web Services reported 28% year-over-year revenue growth in Q1 2026, significantly below Google Cloud’s 63% and Microsoft Azure’s 40%. This divergence highlights intensifying competition in high-margin cloud infrastructure during the AI buildout.
2. Memory Costs Elevate Infrastructure Capex
Memory chip prices have surged 50% this year, prompting Amazon to revise higher its cloud infrastructure capital expenditure forecasts. Rising component costs could pressure margins across AWS’s CSP investments.
3. Potential Standalone Chip Unit
Amazon is evaluating the spin-off of its Graviton and Trainium processor business for third-party sales, leveraging an internal $20 billion annual run rate with potential to scale to $50 billion. The move would diversify AWS revenue and compete directly with chip vendors.