Amazon Bets Big on Trainium Chips as AI Spending Surges in Q1 2026

Amazon's earnings, revenue, and operating income all came in higher than analysts predicted.
AWS and advertising continue to do most of the heavy lifting, helping push both revenue and profitability higher.
AI demand is clearly accelerating AWS's growth.

Amazon kicked off 2026 with stronger-than-expected first-quarter results, but investor concerns around its rising AI spending quickly tempered the momentum.

The company reported earnings of $2.78 per share, up from $1.59 a year earlier and well above analyst expectations of $1.62. Revenue also beat forecasts, reaching $181.5 billion—up 17% year-over-year from $155.7 billion in Q1 2025—driven largely by growth in AWS, advertising, and its core e-commerce business.

Operating income rose to $23.9 billion, compared to $18.4 billion a year ago, as higher-margin segments like cloud and ads outpaced overall cost growth. Net income followed a similar trajectory, jumping from $17.1 billion to $30.3 billion, supported by strong cloud demand, advertising gains, and a one-time investment boost.

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Despite the strong headline numbers, markets reacted cautiously. Amazon’s stock dipped about 1.6% in after-hours trading before recovering slightly, as analysts flagged concerns about cash flow.

The company reported a sharp drop in free cash flow to $1.2 billion over the trailing twelve months. This decline was driven by a $59.3 billion year-over-year increase in capital expenditures, particularly in property and equipment. As noted by Forbes, investor caution stemmed from the combination of rising spending and shrinking cash flow.

That spending is being fueled largely by AI infrastructure. Amazon disclosed that it spent $44.2 billion on property and equipment in Q1 alone, with additional investments tied to projects like a low-Earth orbit satellite network, according to CNBC. The company is expected to spend up to $200 billion over the year on AI and related infrastructure.

At the same time, Amazon has been cutting costs elsewhere to offset this surge. The company laid off roughly 16,000 employees in the first quarter, trimming its corporate workforce as it reallocates resources toward AI and cloud.

Much of this aggressive spending is tied to surging demand for AI through AWS. The cloud division reported $37.6 billion in revenue, up 28% year-over-year—the fastest growth in 15 quarters. CEO Andy Jassy pointed to this demand as justification for increased capital expenditure, noting that faster AWS growth will continue to drive short-term spending.

That long-term bet is increasingly centered on reducing reliance on Nvidia. Amid global shortages of AI chips, Amazon is pushing its own custom silicon, Trainium. Jassy recently suggested a shift away from Nvidia’s dominance, saying most AI has historically run on its chips but that change is underway.

Amazon says it is already seeing strong traction. According to Jassy, the company has secured more than $225 billion in revenue commitments for Trainium from customers including OpenAI, Anthropic, and Uber. He also claimed Amazon’s custom silicon unit is now among the top three data center chip businesses globally.

Looking ahead, Amazon expects Q2 revenue to land between $194 billion and $199 billion, representing 16% to 19% year-over-year growth. Operating income is projected between $20 billion and $24 billion, compared to $19.2 billion in Q2 2025, despite continued heavy investment in AI and infrastructure.