Amazon's $220 billion spending plan faces data center power constraints
Key Facts
Amazon faces a shortage of available power at some of its cloud data centers, according to an investigation published by Business Insider, as it presses ahead with a $220 billion capital spending plan for 2026. The company raised the budget from $200 billion when it announced its earnings in July, according to Associated Press coverage. The plan covers the company's total capital investments, extending beyond cloud and artificial intelligence infrastructure. It includes investments in robotics, semiconductors and satellites, according to the news agency. Andy Jassy attributed the budget increase primarily to higher memory chip costs. The plan is being implemented amid capacity constraints on meeting demand, which Jassy said during the July earnings call he expected to persist into 2027 as well.
Business Insider's investigation said some Amazon Web Services sites have room for server racks but lack enough power to run them. As a result, ready-to-deploy equipment remains in intermediate warehouses before being installed in data centers. The investigation described some sites as lacking "enough available power to run them," referring to the server racks. In response, Amazon said staging equipment near deployment sites was a routine procedure that allowed installation when capacity became available. A company spokesperson described the arrangement as a "business best practice." The spokesperson disputed the broad assertion that Amazon lacked a path to move the racks into data centers.
On actual spending, Amazon's quarterly report filed with the U.S. Securities and Exchange Commission showed cash capital expenditures rose to $53.1 billion in the second quarter of 2026. That spending totaled $31.4 billion in the corresponding quarter of 2025. The rise in asset purchases coincided with negative free cash flow across the company. According to the earnings release, the net outflow totaled $7.6 billion over the twelve months ended June 2026. Amazon attributed the decline in free cash flow primarily to increased asset purchases tied to artificial intelligence investments.
Meanwhile, the cloud business posted sales growth, with Amazon Web Services revenue rising to $42.2 billion in the second quarter of 2026, according to the earnings release filed with the U.S. regulator. That represented growth of 37% from the same period a year earlier. At the end of June, future customer contract commitments totaled about $496 billion, according to the company's quarterly report. These commitments related primarily to the cloud services unit and had not been recognized as revenue at the end of that period. On returns from server investments, the unit's chief financial officer, John Felton, said in an interview published by Axios on 16 October 2026 that the company was seeing payback periods of less than 3 years. Felton added: "We see payback periods of less than 3 years for these servers," referring to artificial intelligence servers.
Amazon shares jumped about 14% during trading on 31 July 2026 following the earnings announcement, according to Reuters. The gains followed strong results and growth in the cloud business. In its guidance issued in July, Amazon forecast company sales of between $197.0 billion and $202.0 billion in the third quarter of 2026, according to its quarterly report. On infrastructure expansion, Jassy said during the earnings call that the company was on track with its plan to increase power capacity. The plan targets doubling capacity by the end of 2027 from its 2025 level. Jassy said, according to the call transcript published on Investing.com: "We expect to have twice as much power capacity by the end of 2027 as we had in 2025."