Amazon Q2 2025 Earnings: CEO Jassy Dismisses AI Concerns, Microsoft Cloud Growth

‘We could be doing more revenue and helping customers more, and we are working very hard on changing that outcome and how much capacity we have,’ Amazon.com CEO Andy Jassy said.

Andy Jassy, CEO of Amazon Web Services parent Amazon.com, dismissed concerns around whether the vendor can keep up in generative artificial intelligence and rival cloud vendors’ growth rates, laying out the case for AWS’ position as GenAI continues to take off and calling AWS a bigger business and better product compared to offers by the likes of No. 2 cloud vendor Microsoft.

Still, Jassy copped to more work the Seattle-based tech giant can do to increase sales numbers, calling AWS’ $123 billion annual revenue run rate (ARR) “still early” in a business he’s “very bullish about.” He said he thinks AWS will need “several quarters” to resolve capacity constraints.

“We have more demand than we have capacity right now,” Jassy said Thursday during Amazon’s earnings call for its second fiscal quarter, ended June 30. “We could be doing more revenue and helping customers more, and we are working very hard on changing that outcome and how much capacity we have. … I do expect it’s going to get better each quarter, and I’m optimistic about that.”

Amazon Q2 2025

The CEO explained that the capacity constraints AWS faces include power, chips availability and unexpected server yields when ramping up.

When asked on Thursday’s call by an analyst about whether AWS is falling behind AI rivals, Jassy said that the company’s offerings throughout the tech stack put the company in a prime position in a variety of places in the market.

Some AI players are training large frontier models on AWS in one example, Jassy said. A variety of chatbots, coding agents and other large-scale GenAI applications run on AWS. Claude AI model maker Anthropic is among the users of Amazon’s custom Trainium AI chips. And Amazon has a host of products to enable and improve the building and deploying of AI agents.

“The number of agents at scale is still really small in the scheme of what’s going to be the case,” he said. “Part of the problem is it is actually hard to actually build agents, and it’s hard to deploy these agents in a secure and scalable way.”

Boding well for AWS is a number of products Amazon has released to help users move mainframe, VMware, .NET and other legacy workloads to the cloud, he said.

Jassy also expects that as GenAI grows in use, customers will want those applications to operate alongside the rest of their data infrastructure. “There’s just so many more applications and data running on AWS anywhere else,” he said. “I’m very optimistic about, as we get to a bigger scale, what’s gonna happen for AWS on the AI side.”

The CEO pointed out multiple places where AWS sees growth in new AI offers. Amazon’s open-source AI software development kit (SDK) Strands reached 2,500 stars on GitHub, Jassy said. Amazon’s Kiro agentic integrated development environment (IDE) coding agent amassed several hundreds of thousands of developers using or requesting access in the first couple weeks of its release.

AI investments ate into AWS’ margins during the quarter. After a record high of 39.5 percent in the first fiscal quarter, AWS reported 32.9 percent in the second due in part to the cost of chips, data centers and power to meet GenAI demand.

Amazon.com CFO Brian Olsavsky said on the call that the second quarter cash capital expenditures of $31.4 billion, primarily driven by AWS AI investment, is “reasonably representative of our quarterly capital investment rate for the back half of this year.”

Challenging Microsoft’s Cloud Growth

Jassy didn’t mention Microsoft by name when responding to an analyst’s question about AWS growth rates compared to cloud rivals, instead referring to the “second place player” in the cloud market–which by most measures is Microsoft.

On Wednesday, Microsoft revealed that it exceeded expectations for its flagship Azure cloud product in its latest quarterly earnings call. Azure’s 39 percent growth year over year beat expectations that were closer to the mid-30s and was a 4-percentage point acceleration quarter over quarter.

“The second player is about 65 percent of the size of the AWS,” Jassy said. “If you look at the second-place player you’re talking about, it’s still a pretty significant market segment leadership position that we have.”

CRN has reached out to Microsoft for comment. Microsoft has about 500,000 partners in its channel ecosystem compared to about 130,000 in AWS’ ecosystem.

Jassy held up AWS as better than rival cloud products because customers focus on cloud operational performance, availability, durability, latency, data security, throughput and a variety of services outside of core infrastructure, Jassy said, dismissing rivals’ better growth rates as short-term gains.

“I feel good about the inputs and the services that we’re offering to customers across AI as well as non-AI,” he said. “When we look at the results over the last number of quarters, there’s some times where–as far as we can tell–we’re going faster than others. Sometimes others are growing faster than us. … These are all really just moments in time.”

The Amazon.com CEO appeared to take a swipe at Microsoft over worldwide exploitation of a vulnerability in SharePoint software that has affected organizations this month, saying that AWS customers see a “very big difference in security.”

“You can just look at what’s happened the last couple months,” Jassy said. “You can just see the adventures of some of these players (experience) almost every month. So very big difference, I think, in security.”

In a nod to continued advancement in the AWS portfolio, Jassy also told analysts to look forward to growth in Amazon’s Starlink competing satellite internet service, called Project Kuiper.

“If you think about enterprises and governments, a lot of what they want to do when they take the data down from space is they actually want to put it into a cloud to do analysis, analytics and AI and various operations on top of it,” Jassy said. “The fact that Project Kuiper and AWS are so seamlessly connected is very attractive to enterprises and to governments. I’m kind of amazed–we haven’t launched Project Kuiper yet, but the number of enterprise and government agreements that have been signed already to use Project Kuiper is impressive.”

AWS had a backlog of $195 billion at the end of the quarter, up about 25 percent year over year.

Tariff Uncertainty

Although tariffs more directly impact Amazon’s e-commerce business rather than the cloud and AI practices solution providers focus on, Jassy’s uncertainty over the effects of global tariffs could be a notable macroeconomic takeaway for the channel.

“We just don’t know what’s going to happen moving forward,” the CEO said on Thursday’s call. “It’s hard to know where the tariffs are going to settle, particularly in China. It’s hard to know what will happen when we deplete some of the pre-buys that we did on our own first-party retail and then some of the forward-deploying that we saw of our third-party selling partners.”

Jassy said that he is unsure who will end up absorbing higher item costs if they go up over time. Although things could change in the second half of 2025, in the first half, “we just haven’t seen diminished demand, and we haven’t seen any kind of broad scale ASP (average selling price) increases,” he said.

For the fiscal quarter, AWS sales grew 17.5 percent year over year to $30.9 billion, according to the vendor. The vendor saw $10.2 billion in operating income, up about 10 percent year over year.

Amazon.com expects third fiscal quarter net sales of $174 billion to $179.5 billion–10 percent growth year over year to 13 percent. Amazon did not break out expectations for AWS.

Amazon.com‘s stock traded at about $220 a share after hours Thursday, down about 7 percent.