Platformonomics TGIF #79: February 7, 2025

Amazon CAPEX – Q4 2024

Amazon’s CAPEX for the whole company was $27.834 billion in Q4 (+91%), and $82.999 billion (+57%) for the year (not including finance or built-to-suit leases in those numbers, as they are becoming de minimis).

Many Twitter CAPEX experts and media blindly credit Amazon’s overall CAPEX spend to AWS/AI infrastructure, forgetting that Amazon has a $500+ billion retail business that consumes CAPEX as well.

Annually Amazon breaks out its CAPEX spend for AWS. In 2024, $53.27 billion went to AWS CAPEX, 64% of their total CAPEX spend. That is slightly more than Google and less than Microsoft spent in 2024.

AWS total CAPEX actually declined for the first time ever in 2023, in tandem with a decline in overall CAPEX. Overall CAPEX and AWS CAPEX have bounced back in 2024, with AWS expanding from 51% of Amazon CAPEX in 2023 to 64%. That is a record high for AWS as a percentage of overall Amazon CAPEX.

Commentary:

First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development, particularly in the area of artificial intelligence and machine learning. As a result, we’re decreasing the useful life for a subset of our servers and networking equipment from six years to five years, beginning in January 2025.

On the capex side, as Brian mentioned earlier, we spent $26.3 billion in capex in Q4. And I think that is reasonably representative of what you could expect in annualized capex rate in 2025. The vast majority of that capex spend is on AI for AWS.

“Vast majority” is doing a lot of work here, with total AWS CAPEX spend comprising 64% of total spend, and AI a subset of that. Yet that is the soundbite that got widely propagated from the quarterly conference call. It is nice to see companies trying to get credit for maximal data center/AI CAPEX.

However, it is true that we could be growing faster, if not for some of the constraints on capacity. And they come in the form of, I would say, chips from our third-party partners, come a little bit slower than before

Those Amazon-NVIDIA meetings remain testy. But yay Trainium!

$14.28B billion for Q4 (+30%), $52.535B (+63%) for the year.

Commentary:

In terms of expenses. First, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation.

In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increasing CapEx investments over the past few years, we expect the growth rate in depreciation to accelerate in 2025.

And as you’ve seen in the comment I just made on Cloud, we do have demand that exceeds our available capacity. So we’ll be working hard to address that and make sure we bring more capacity online.

We do have the benefit of having a very broad business. And we can repurpose capacity, whether it’s through Google Services or Google Cloud to support. As I said, whether it’s Search or GDM or Google Cloud customers, we can do that in a more efficient manner.

We have our own customized TPUs. They are customized for our own workloads, so they do deliver outstanding, superior performance in CapEx efficiency. So we’re going to be looking at all that when we make decisions as to how we’re going to progress capital investments throughout the coming years.

Guidance: $75 billion in 2025!

We expect to invest approximately $75 billion in CapEx in 2025, with approximately $16 billion to $18 billion of that in the first quarter. The expected total investment level may fluctuate from quarter to quarter, primarily due to timing of deliveries and construction schedules.

My new obsession may reside at the intersection of cheese, finance and technology.