Hyperscaler Data Center and AI Capex Does Not Seem to be Slowing

The first quarter 2025 quarterly financial reports from Amazon, Alphabet, Microsoft, and Meta provide strong evidence that investments in data centers, particularly for AI and cloud computing, have not slackened, recent near panic notwithstanding.

Amazon reported capital expenditures of $24.3 billion in Q1 2025, a 74 percent year-over-year increase. The company’s CFO, Brian Olsavsky, indicated that 2025 CapEx is expected to exceed $100 billion, with the "vast majority" allocated to Amazon Web Services (AWS) and AI infrastructure.

AWS generated $29.3 billion in revenue, up 17 percent year-over-year, with an operating income of $11.55 billion and a 39.5 percent operating margin, the highest since at least 2014. 

CEO Andy Jassy also emphasized that AWS growth is constrained by data center capacity, not demand. 

Microsoft announced plans to invest $80 billion in fiscal year 2025, largely for AI-driven data centers. In Q1 2025 (fiscal Q3 for Microsoft, ending March 31, 2025), capital spending on property and equipment rose 50 percent year-over-year to $14.92 billion, exceeding analyst expectations of $14.58 billion.

Azure and other cloud services grew 33 percent year-over-year (34 percent in constant currency), with 12 percentage points attributed to AI services. The Intelligent Cloud segment, including Azure, generated $26.8 billion in revenue, up 20 percent, with an operating income of $11.1 billion. 

CEO Satya Nadella also noted that demand exceeds available capacity, driving data center expansion.

Microsoft’s investments include expanding Azure data centers by 40 percent in Europe over the next two years and terminating some data center leases to optimize AI-focused infrastructure.

A $80 billion capex commitment, 50 percent increase in Q1 spending, and strong Azure growth suggest continued growth.

Alphabet projected $75 billion in capex for 2025, primarily for data center infrastructure to support its cloud and AI initiatives. Google Cloud revenue reached $12.26 billion, up 28 percent year-over-year, slightly below expectations of $12.27 billion but with improved margins of 17.8 percent (up from 9.4 percent a year ago).

The $75 billion capex plan and 28 percent cloud revenue growth suggest both the investment push and revenue realization. 

Meta increased its 2025 capex guidance to $64 billion to $72 billion, up from $60 billion to $65 billion.

The point: AI and data center investments by the hyperscalers do not seem to be slackening, some fears of that sort notwithstanding.