Amazon Q4 2025 earnings conference call
Key Takeaways (AI-Generated)
Financial Performance
- Q4 2025 revenue of $213.4 billion, up 12% year-over-year
- AWS revenue accelerated to 24% growth, reaching $142 billion annualized run rate
- Trailing 12-month free cash flow of $111.2 billion with operating income of $25 billion
- Full year operating cash flow of $139.5 billion, up 20% year-over-year
Business Highlights
- AWS chips business (Graviton and Trainium) exceeded $10 billion annual revenue run rate
- Bedrock AI service reached multibillion dollar annualized run rate with 60% quarterly growth
- Prime Video expanded to 315 million global viewers from 200 million early 2024
- Kuiper satellite project launched 180 satellites with 2026 commercial launch target
Financial Guidance
- Q1 2026 net sales expected between $173.5-$178.5 billion
- Q1 2026 operating income projected between $16.5-$21.5 billion
- Approximately $200 billion planned capital expenditures, predominantly in AWS infrastructure
- $1 billion year-over-year cost increase expected for Amazon Kuiper operations
Opportunities
- Market expansion of Amazon Now quick commerce to additional countries
- AI agents development and custom silicon chips innovation potential
- Strategic partnerships with OpenAI, Visa, NBA, and enterprise customers
- Operational efficiency gains through robotics deployment and inventory optimization
Risks
- Competitive pressure requiring aggressive pricing in international markets
- Supply constraints limiting faster AWS growth despite strong customer demand
Full Transcript (AI-Generated)
Operator
Hello and welcome to our Q4 2025 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter.
Please note unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2024. Our comments and responses to your questions reflect management's views as of today, February 5th, 2026 only and will include forward-looking statements. Actual results may differ materially.
Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with comparable GAAP measures.
Our guidance incorporates the order trends that we've seen today and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including from memory chips, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services and new and emerging technologies, and the various factors detailed in our filings with the SEC.
Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings or legal settlements. It's not possible to accurately predict demand for our goods and services and therefore our actual results could differ materially from our guidance. And now I'll turn the call over to Andy.
Andy Jassy
Thanks, Dave. We're reporting $213.4 billion in revenue, up 12% year over year. Excluding the impact from foreign exchange rates, operating income was $25 billion and trailing 12-month free cash flow was $111.2 billion. We're seeing strong growth and with the incremental opportunities available to us in areas like AI chips, low Earth orbit satellites, quick commerce and serving more consumers everyday essentials needs, we have a chance to build an even more meaningful business than Amazon in the coming years with strong return on invested capital and we're investing to do so.
We're already seeing strong demand in these areas even in these early innings. I'll start with AWS. AWS growth continued to accelerate to 24%, the fastest we've seen in 13 quarters, up $2.6 billion quarter over quarter and nearly $7 billion year over year. AWS is now a $142 billion annualized run rate business and our chips business inclusive of Graviton and Trainium is now over $10 billion in annual revenue run rate growing triple digit percentages year over year.
As a reminder, it's very different having 24% year over year growth on a $142 billion annualized run rate than to have a higher percentage growth on a meaningfully smaller base, which is the case with our competitors. We continue to add more incremental revenue and capacity than others and extend our leadership position. We're continuing to see strong growth in core non-AI workloads as enterprises return to focusing on moving infrastructure from on-premises to the cloud.
Along with AWS having the broadest functionality, strongest security and operational performance and most vibrant partner ecosystem, AWS continues to earn most of the big enterprise and government transitions to cloud. Since our last call, we announced new agreements with OpenAI, Visa, NBA, BlackRock, Perplexity, Lyft, United Airlines, DoorDash, Salesforce, US Air Force, Adobe, Thomson Reuters, AT&T, S&P Global, National Bank of Canada, the London Stock Exchange, Choice Hotels, Accenture, Indeed, HSBC, CrowdStrike and many more.
More of the top 500 US startups use AWS as their primary cloud provider than the next two providers combined. We're adding significant EC2 core computing capacity each day, and the majority of that new compute is using our custom CPU silicon, Graviton. Graviton is up to 40% more price performance than leading x86 processors and is used extensively by over 90% of AWS's top 1,000 customers. Graviton itself is a multibillion dollar annual run rate business growing more than 50% year over year.
We consistently see customers wanting to run their AI workloads where the rest of their applications and data are. We're also seeing that as customers run large AI workloads in AWS, they're adding to their core AWS footprint as well. But the biggest reason that AWS continues to gain AI share is our uniquely broad top to bottom AI stack functionality in AI. We're doing what we've always done in AWS, solving customer challenges.
Let me give you some examples. The first challenge is having a strong foundation model to generate inferences or predictions. Customers are realizing as they get further into AI that they need choice, as different models are better on different dimensions. In fact, most sophisticated AI applications leverage multiple models. Whether customers want frontier models like Anthropic's Claude or open models like Mistral or Llama, frontier intelligence with lower costs and latency like Amazon Nova, or video and audio models like 12 Labs or Nova Sonic, Amazon Bedrock makes it easy to use these models to run inference securely, scalably, and performantly.
Bedrock is now a multibillion dollar annualized run rate business and customer spend grew 60% quarter over quarter. The second challenge is how to hone the model for your application. Customers sometimes think if they have a good model, they will have a good AI application. It's not really true. It takes a lot of work to post-train and fine-tune a model for your application. Our SageMaker AI service, along with fine-tuning tools in Bedrock make this much easier for customers.
A third challenge is how to have a custom version of a foundation model that best leverages a company's secret sauce, their own data. To date, companies have tried to shape models with their own data late in the process, usually with fine-tuning or post-training. There's debate in the industry about this, but we believe that enterprises will want models trained on their own data at an early stage of pre-training if possible, so their models have the best possible foundation for what matters most to each enterprise on which to learn and evolve.
It's a little like teaching a child a foreign language early in their life that becomes part of their learning foundation moving forward, and it makes it easier to pick up other languages later in their life. To solve for this need, we just launched Nova Forge which gives customers early checkpoints on our Amazon Nova models, allows them to securely mix their own proprietary data with the model's data in the pre-training stage and enables their own uniquely customized versions of Nova, what we call Novellas, trained with their data early in the process.
This will be very useful for companies as they build their own agents on top of the model. There is nothing else out there like this today and a potential game changer for companies. Another challenge is cost. I've said this many times, but if we want AI to be used as expansively as companies want, we have to make the cost of inference lower. A significant impediment today is the cost of AI chips.
Customers are starving for better price performance and typically and understandably, the dominant early leaders aren't in a hurry to make that happen. They have other priorities. It's why we built our own custom silicon in Trainium and it's really taken off. We've landed over 1.4 million Trainium 2 chips, our fastest ramping chip launch ever. Trainium 2 is 30 to 40% more price performance than comparable GPU.
It is a multibillion dollar annualized revenue run rate business with 100,000 plus companies using it for training as the majority underpinning of Bedrock usage today. We recently launched Trainium 3, which is up to 40% more price performance than Trainium 2. We're seeing very strong demand for Trainium 3 and expect nearly all of our Trainium 3 supply of chips to be committed by mid-2026. And though we're still building Trainium 4, we're seeing very strong interest already.
Looking ahead, the primary way companies will get value from AI is with agents, some their own, some from others, and there are several customer challenges that we're well positioned to solve. It's harder to build agents than it should be. For that, we've built Agents for Bedrock service enabling agents to be created from any model. Once agents are built, enterprises are apprehensive about deploying to production because these agents need to securely and scalably connect to compute, data, tools, memory, identity, policy, governance, performance monitoring and other elements.
This is a new and hard problem where a solution has not existed until we launched Bedrock Agents Corp. Customers are quite excited about Agents Corp and it's unlocking deployments. Customers also want to leverage others' useful agents and we've built several including CodeGuru for coding, Amazon Q for knowledge workers to leverage their own data and analytics, AWS Transformation for software migration, and Amazon Connect for call center operations.
We continue adding new capabilities and use continues to grow quickly. For example, the number of developers using CodeGuru grew more than 150% quarter over quarter. In addition to agents that customers direct, customers are also becoming excited about agents that require less human interaction, that can be fully autonomous, run persistently for hours or days, scale out quickly and remember context.
At this past AWS re:Invent, we launched Frontier Agents to do that - CodeGuru autonomous agents for coding tasks, AWS DevOps agents for detecting and resolving operational issues, and AWS Security agents for proactively securing applications throughout the development lifecycle. And they're already making a big difference for customers. We expect to invest about $200 billion in capital expenditures across Amazon, but predominantly in AWS because we have very high demand.
Customers really want AWS for core and AI workloads and we're monetizing capacity as fast as we can install it. We have deep experience understanding demand signals in the AWS business and then turning that capacity into strong return on invested capital. We're confident this will be the case here as well. I'll now turn to stores.
We continue to expand selection including more than 400 new beauty brands in the US in 2025 like Bobbi Brown Cosmetics, Charlotte Tilbury and Laura Mercier and new fashion brands like Away Luggage, Converse, Diesel, Michael Kors, Nike and The North Face. Our ultra low-priced offering, Amazon Haul grew selection to over a million items under $10 and expanded to serve customers in more than 25 countries and regions.
We continue to see strong customer response to Everyday Essentials and grocery. In 2025, Everyday Essentials grew nearly twice as fast as all other categories in the US, representing one out of every three units sold in our stores. And we've become a go-to grocery destination for over 150 million Americans, mostly through online shopping and Whole Foods with over $150 billion in gross sales. Amazon is clearly a large grocer at this point.
Customers in thousands of US cities and towns can now get perishables delivered same day alongside millions of other items, and customers who use that service shop more than twice as often as customers who don't. We plan to expand to many more communities in 2026, and we also plan to open more than 100 new Whole Foods Market stores over the next few years as we work to make grocery shopping easier, faster and more affordable for customers.
We remain committed to staying sharp on price and continue to meet or beat other retailers' prices. A recent study from Profitero showed that Amazon is America's lowest-priced retailer for the ninth straight year, 14% lower on average than other major online retailers. We again achieved our fastest ever delivery speeds for Prime members around the world in 2025. In the US, we delivered for nearly 70% more items same day than the year before.
We also continue increasing speed for rural customers with nearly two times more average monthly customers in rural areas receiving same day delivery year over year. Same Day is our fastest growing delivery offering and nearly 100 million customers used it last year in the US and the team is continuing to innovate. We've launched Amazon Now in India, Mexico and the UAE, ultra fast delivery on thousands of items in about 30 minutes or less. And we're testing it in several communities in the US and UK.
It's early, but customers are loving it. For example, in India, customer response exceeded our most optimistic expectations and we're seeing Prime members triple their shopping frequency once they start using it. Expanding our same day delivery coverage also leads to meaningfully later cut-off times for orders, which is a big deal for customers. For example, on Christmas Eve, customers in about 4,000 US cities could order items up until midday and get them that same day.
Another example is our recently launched feature, Add to Delivery, which enables Prime members in the US to add items to their upcoming Amazon deliveries with just one tap, without going through checkout again or paying additional shipping fees. Just six months after launch, Add to Delivery already makes up about 10% of all Prime volume fulfilled through the Amazon network each week.
While this seems simple on the surface, this feature is supported by a lot of invention where we need to figure out in real time with incredibly low latency, what items among Amazon's hundreds of millions of products are available to add to a customer's upcoming deliveries, surface them, find a way to include in their packages, and deliver within the same customer promise.
The Stores team is also continuing to innovate and deliver for customers with AI. Our agentic AI shopping assistant, Rufus, is rapidly expanding. Rufus can research products, track prices and auto-buy, purchasing a product in our store when it reaches your set price. They can also now shop tens of millions of items in other online stores and make purchases for customers using our agentic Buy for Me feature. Last year, more than 300 million customers used Rufus.
In addition, customers use Lens, our AI-powered visual search tool to find products with a phone's camera, a screenshot or a barcode and they did it 45% more year over year. Moving on to Amazon Ads. We're pleased with the continued strong growth across our full funnel offerings, generating $21.3 billion of revenue in the quarter and growing 22% year over year.
Sponsored Products advertising in our stores continues to be our largest ads offering and the combination of trillions of shopping, browsing and streaming signals with advanced AI and machine learning let us deliver highly relevant useful ads for customers. We saw continued growth in Prime Video ads, which is now available in 16 countries and is contributing meaningfully to our revenue growth. Prime Video has an average ad-supported audience of 315 million viewers globally, up from 200 million in early 2024.
Our ads team is also innovating with AI. We recently announced our Ads Agent, which lets brands use AI to create and optimize campaigns at scale, implement effective campaign targeting and quickly create actionable insights. And our Creative Agent lets advertisers research, brainstorm and generate full funnel ad campaigns from concept to completion using conversational guidance and Amazon's retail data, transforming what was a week-long process into just hours.
We're also continuing to invent and see momentum in several other areas. And I'll mention just a few starting with live sports. On Prime, the fourth season of Thursday Night Football broke more records. It was our most watched season ever, averaging more than 15 million viewers, a 16% year over year increase and a third consecutive year of double digit growth. And the Packers versus Bears Wild Card game was the most streamed NFL game in history with 31.6 million viewers, clearing the prior mark by more than 4 million.
We just made Alexa Plus available to all customers in the US free for Prime members and $19.99 a month for non-Prime members. Alexa Plus continues to get even better and more capable. And we've added new ways to interact with Alexa including a new chat experience at alexa.com, a redesigned mobile app and new integrations with third party devices like Samsung TVs and BMW cars. We've also added new features like the ability to answer a Ring doorbell on a customer's behalf and more ways to shop or manage a home.
And finally, the team is making rapid progress on Amazon Kuiper, which will bring connectivity to consumers, enterprises and governments in places where they don't have broadband connectivity. Our enterprise grade customer terminal, Kuiper Ultra is the fastest satellite Internet antenna ever built, delivering simultaneous download speeds of up to 1 Gigabit per second and upload speeds of up to 400 megabits per second.
Kuiper will offer enterprise grade performance and advanced encryption with secure VPN networking that bypasses public Internet connecting directly to AWS. We've launched 180 satellites, have more than 20 launches planned in 2026, more than 30 in 2027, and expect to launch commercially in 2026. We have dozens of commercial agreements already signed, including with AT&T, DIRECTV Latin America, JetBlue and Australia's National Broadband Network and have many more on the way.
It's been an action-packed year of innovation and progress and we've hit the ground running in 2026. With that, I'll turn it over to Brian for a financial update.
Brian Olsavsky
Thanks, Andy. Starting with our top line financial results, worldwide revenue was $213.4 billion, a 12% increase year over year excluding the 150 basis points favorable impact of foreign exchange. In Q4, we reported worldwide operating income of $25 billion. This operating income includes three special charges, which reduced operating income by $2.4 billion.
The first charge of $1.1 billion is for the resolution of tax dispute associated with our stores business in Italy and the settlement of a lawsuit. This charge primarily impacts our International segment and is largely recorded in the fulfillment and other operating expense line items. Second charge of $730 million is for the estimated severance costs. This charge impacts all three of our segments and is reported primarily in the fulfillment, sales and marketing and technology and infrastructure expense line items.
The third charge of $610 million is for asset impairments primarily related to physical stores. This charge primarily impacts the North America segment as reported in other operating expense line. Moving on to our segment results in the North America segment, fourth quarter revenue was $127.1 billion, an increase of 10% year over year. International segment revenue was $50.7 billion, an increase of 11% year over year.
Excluding the impact of foreign exchange, worldwide paid units grew 12% year over year, which was our highest quarterly growth rate in 2025. The fourth quarter marked a strong finish to the year as we delivered for customers during the peak holiday season. Our sharp pricing, vast selection and record fast delivery speeds resonated with customers. They appreciated the convenience of receiving their items quickly for gifts for family and friends to everyday essentials and perishable groceries.
Our millions of global third party sellers continue to be an important contributor to our broad selection. In Q4, worldwide third party seller unit mix was 61%. We continue to invest in tools and services, including a comprehensive suite of AI tools that help our selling partners manage and grow their businesses, shifting to profitability.
North America segment operating income was $11.5 billion with an operating margin of 9%, up from an 8% margin in Q4 of 2024. Our International segment operating income was $1 billion with an operating margin of 2.1%, excluding the impact of special charges mentioned earlier. International segment operating margins also expanded year over year.
We're pleased with the fulfillment network performance throughout the peak season. We've made strong progress improving the cost structure of our network over the past few years. In the US, our regionalized network is operating at scale, but we've continued to make refinements. This regionalization has improved local inventory placement, leading to faster delivery and lower costs.
Last year, US Prime members received over 8 billion items the same or next day, up more than 30% year over year with groceries and everyday essentials making up half of the total items. For the third year in a row globally, in 2025, we achieved both our fastest ever delivery speeds for Prime members while also reducing our cost to serve.
By leveraging our existing US network, we can now deliver perishable groceries to customers in more than 2,300 cities and towns, all with same day delivery. We saw significant adoption of this service throughout the year. When customers engage with our perishable offering, they demonstrate notably higher monthly spend compared to those who did not shop the category. We also see the customers shopping perishable groceries add three times more items to their same day delivery orders.
Looking ahead, we see further opportunity to enhance productivity in our global fulfillment network while delivering at faster speeds for customers. We'll continue optimizing inventory placement to drive down distance traveled, reduce touches per package and improve package consolidation, as well as launch robotics and automation to increase efficiency and elevate the customer experience.
Shifting to advertising. Advertising revenue grew 22% in the fourth quarter and we added over $12 billion of incremental revenue in 2025 alone as our full funnel advertising approach of connecting brands with customers is resonating, simplifying the advertiser experience to enable brands to better reach customers wherever they are.
Moving next to our AWS segment, revenue was $35.6 billion and growth accelerated to 24% year over year. We had a $2.6 billion in quarter over quarter revenue and AWS now has an annualized revenue run rate of $142 billion. This acceleration was driven by both core and AI services as customers continue to modernize their infrastructure and migrate workloads to the cloud. Our AI offerings continue to resonate with customers, including our agentic capabilities.
This growth was helped in part by the more than one gigawatt of capacity we added in Q4. In 2025, AWS added more data center capacity than any other company in the world. AWS operating income was $12.5 billion. We're seeing strong top line growth while remaining focused on driving efficiencies across the business. This includes investing in software and process improvements to optimize server capacity, developing a more efficient network using our lower cost custom networking gear and advancing custom silicon.
At the same time, we continue to rapidly develop products and services on behalf of customers. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. Turning to cash flows, our full year operating cash flow increased to $139.5 billion in 2025, up 20% year over year, due primarily to operating income and changes in working capital.
Now turning to our Q1 financial guidance, Q1 net sales are expected to be between $173.5 billion and $178.5 billion. This guidance anticipates a favorable impact of approximately 180 basis points from foreign exchange rates. As a reminder, global currencies can fluctuate during the quarter. Q1 operating income is expected to be between $16.5 billion and $21.5 billion.
A few things to mention on the operating income guidance within the North America segment. We do expect a year over year cost increase of approximately $1 billion related to Amazon Kuiper. We have more than 20 launches planned in 2026 and more than 30 in 2027, which means we're spending more on launching satellites each year. Select enterprise customers are testing Amazon Kuiper services now and we expect a wider commercial rollout later this year.
As a reminder, today, we do expense most of these Kuiper costs as incurred. We expect that later in the year many of these costs such as satellite manufacturing and launch services will be capitalized. Within the International segment, we're continuing to invest more in our stores business to enhance the customer experience and to encourage retail demand to move online more quickly.
This includes bringing faster delivery options including Amazon Now, our service which delivers to customers in 30 minutes or less. We're also working hard to stay sharp on pricing and seller fees and there are countries where we've had to be more aggressive to meet or beat competitors' prices. We like these investments because they delight customers, grow our business and we believe they will generate long term positive return on invested capital.
As we enter 2026, I'm energized by our team's strong execution. I want to thank everyone across the company for their hard work on behalf of our customers. We're being focused on driving an even better customer experience, which is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.
Operator
At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question. If you would like to ask a question, please press *1 on your telephone keypad. We ask that when you pose your question, you pick up your handset to provide optimum sound quality. Once again, to initiate a question, please press * then one on your touch tone telephone. At this time, please hold while we poll for questions. Thank you.
Our first question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.
Mark Mahaney
OK, thanks. I think Brian, let me throw this to you or maybe to Andy on the strong long term return on invested capital. I think that's the debate in the market today. So could you give us a little bit more insight into, you know, how do you think investors will be able to see that either talk about the duration of the CapEx cycle that you're going through now or what we should see in terms of profitability levels.
And maybe also talk about like other de minimis or minimum free cash flow generation levels that you don't want to go below as you go through this CapEx cycle. Just help us, you know, get to that get get to your level of confidence and having a strong long term return on that invested capital. Thank you.
Brian Olsavsky
Yeah, sure, Mark, thank you. I'll start from the financial side. So on the investments we're making, as Andy said earlier, you know we are putting into service with customers all capacity that we're getting and it's immediately useful. And we're also seeing a long arc of additional revenue that we see from other customers and backlog and commitments that people are anxious to make with us, especially for AI services.
So you can see that's working its way into our P&L both through CapEx and also to our operating margin in AWS. AWS is 35% operating margin through Q4, up 40 basis points year over year just talked about before. That is going to fluctuate over time and certainly has a headwind from the investments in AI and the depreciation on that CapEx. But we also work very hard to offset that with efficiencies and cost reductions.
So we will see how that develops over time. So, but yeah, we see a long strong return on invested capital, see strong demand for these services and we continue to like the investments in this area.
Andy Jassy
I would add to that, you know, if you look at the capital we're spending and intend to spend this year, it's predominantly in AWS and some of it is for our core workloads which are non-AI workloads because they're growing at a faster rate than we anticipated. But most of it is in AI and we just have a lot of growth and a lot of demand.
And when you're growing 24% year over year with an annualized revenue run rate of $142 billion, you're growing a lot. And what we're continuing to see is as fast as we install this capacity, this AI capacity, we are monetizing it. So it's just a very unusual opportunity. You know, as I've shared a lot of times, I passionately believe that every customer experience that we know of today is going to be reinvented with AI.
They're going to be a whole bunch of customer experiences that none of us ever imagined that are going to become the norms of how we all operate every day and what we use. I think the other thing is that if you really want to use AI in an expansive way, you need your data in the cloud and you need your applications in the cloud. Those are all big tailwinds pushing people towards the cloud.
So we're going to invest aggressively here and we're going to invest to be the leader in this space as we have been for the last number of years. We have I think a fair bit of experience over the years in AWS of forecasting demand signals and doing it in such a way that we don't have a lot of wasted capacity and that we also have enough capacity to serve the demand that's there.
And I think we've also proven with AWS over the years and how we build data centers and how we run them and how we invent in there. If you think about our chips and our hardware, our networking gear and how we've invented and power that this isn't some sort of quixotic top line grab. You know, we have confidence that we that these investments will yield strong term, strong returns on invested capital.
We've done that with our core AWS business and I think that will very much be true here as well. And I think some of the things that you will see over time in the AI space is you're going to keep seeing all the inference services, which is going to be the majority of the long term AI workloads is going to be inference. You're going to see the inference keep getting optimized.
You're going to see higher utilization on those services. You'll see prices normalize over a period of time. And then I think the companies that have not just the excellence and infrastructure, but also the components that give them it give customers better price performance and give those companies themselves better economics are going to have advantage financials.
And I think if you look, we're already off to a really good start having Trainium underneath the majority of our Bedrock service. And that's not just giving customers better prices, but it also gives us better economics. And so we see that following the same sorts of patterns we saw in the early days of our core AWS investment. I'm very confident we're going to have strong return on invested capital here.
Operator
And the next question comes from the line of Doug Anmuth with JP Morgan. Please proceed with your question.
Doug Anmuth
Thanks so much for taking questions. Can you just talk about how Project Rainier is running with Anthropic after its first full quarter? And I think in the release it talks about 500,000 chips, but a few months ago you talked about getting to 1 million as well. So if you could clarify that and then maybe just a follow up on Mark's question.
Are there any financial guardrails or governors in place that we should think about around the spend just in terms of operating income growth or positive free cash flow? Thanks.
Andy Jassy
Yeah, I'll start with the Trainium piece. We are very excited about the growth that we see in Trainium and the future that we have there. You know, I think if you look at what's happened in the early innings of AI over the first few years, you see a lot of usage, but customers are really thirsty for better price performance and Trainium has 30 to 40% better price performance than comparable GPU. So it's very compelling to customers.
You mentioned Project Rainier. Anthropic is building their next, they're training the next Claude model on top of Trainium 2 and that's what Project Rainier is. We talked about 500,000 chips there. You will see that continuing to increase. They're also using a fair bit of Trainium 2 for other workloads and their own APIs beyond just Project Rainier, but Trainium is a multibillion dollar annualized run rate business at this point and it's fully subscribed.
And what you're also seeing is Trainium 3, which is the next version of Trainium which we just started shipping. That's 40% more price performance than Trainium 2 and we have there is very substantial amount of interest there. We expect that nearly all of that supply will be committed by somewhere around the middle of this year.
And we're just in the process of building Trainium 4. There's very substantial interest in Trainium 4 which is coming in 2027 and we're already having conversations about Trainium 5. So there is a lot of interest in Trainium at this point. And I think when you, you know, I think people know about our chips capability, our chips business, but I'm not sure folks realize how strong a chips company we've become over the last 10 years.
You know, if you look at what we've done with Trainium, if you look at what we've done with Graviton, which is our CPU chip, which is about 40% better price performance than comparable x86 processors, 90% of the top 1,000 of those customers are using Graviton very extensively. If you combine Trainium Graviton, it's well over a $10 billion annualized run rate business and it's still very early there.
So I'm very optimistic about what we're seeing. We have, you know, the project Rainier has gone very well. I think Anthropic is quite pleased with it. We've learned a lot in the process as well, but it's early days with what's possible here. This is a big business that's getting bigger and has a lot of potential.
And I just, you know, I'd briefly comment on your second question that, you know, we are, as I mentioned, this is what you know, I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole. I think it also is an extraordinary opportunity for companies to change all their customer experiences and for startups to be able to build brand new experiences and businesses that would have taken much longer to try to accomplish before that they can do right now.
And so we see this as an unusual opportunity and we're going to invest aggressively here to be the leaders because I, you know, like we've been the last number of years and like I think we will be moving forward.
Operator
Thank you. The next question comes from the line of Ross Sandler with Barclays. Please proceed with your question.
Ross Sandler
Great. Andy, you mentioned a few calls back how the AI market was currently at the top heavy with a lot of the spend kind of clustering around a few of the AI native labs. So how is that changing as you look out into 26? And specifically, how do you think you might extend your relationship with a company like OpenAI to maybe help Amazon's AI efforts both on the retail side and the AWS side? Thanks a lot.
Andy Jassy
Yeah. The way I would describe what we see right now in the AI space is it's really kind of a barbelled market demand. We're, you know, on one end you have the AI labs who are spending gobs and gobs of compute right now along with and what I would consider a couple runaway applications. And then at the other side of the barbell, you've got a lot of enterprises who are getting value out of AI in doing productivity and cost avoidance types of workloads.
These are things like customer service or business process automation or some of the fraud pieces. And then in that middle of the barbell are all the enterprise production workloads. And I would say that the enterprises are in various stages at this point of evaluating how to move those, working on moving those and then putting them into production.
But I think that middle part of the barbell very well may end up being the largest and the most durable. And I would put in the middle of that barbell too, by the way, I would put just the all together brand new businesses and applications that companies build that right from the get go run in production on top of AI.
And so I think that, you know, to me, when I look at this, what's happening, it's kind of unbelievable if you look at the demand of what you're seeing already with AI, but the lion's share of that demand is still yet to come in the middle of that barbell. And that will come over time. It will come as you have more and more companies with AI talent, as more and more people get educated with that AI background, as inference continues to get less expensive.
And that's a big piece of what we're trying to do with Trainium and our hardware strategy. And you know, and as companies start to have success in those workloads to, you know, further and further success and moving those workloads to run on top of the AI. So I think there's it's just a huge opportunity. It's still in the relative early stages, even though it's growing at a very like unprecedented clip as we've talked about, you know, and then I think how do we see our relationships extending with other companies like OpenAI?
You know, I would tell you that this movement and what's happening in AI is it's very broad. It's going to be a lot of companies. It is a lot of companies already. There's a number of AI labs, but almost every company you talk to, almost every conversation we have on the AWS side starts with AI, you know, and so you it, you know, we have very significant relationships with a lot of different companies.
You know, I think we announced an agreement with OpenAI in November. We're excited about that agreement. It's a big one. And we have a lot of respect for the company and we hope to continue to extend our partnership over time. But this, you know, this AI movement is not going to be a couple companies. It's going to be thousands of companies over time.
Operator
Thank you. The next question comes from the line of Michael Morton with Moffett Nathanson. Please proceed with your question.
Michael Morton
Hi, good evening. Thank you for the question. This one's on the retail business. Andy's talked about how you're passionate this is going to change experiences across the board and you've shared some encouraging data points on Rufus and we're seeing all the other Internet platforms roll out agentic protocols. I would love to see how you think this plays out for the retail business and the on site ads portion of the retail business is what seems like it could be a compression in the funnel as consumers get better answers over time. Anything there would be great. Thank you.
Andy Jassy
I'm very, I'm very optimistic about the customer experience that will ultimately be what customers use for agentic shopping. And I think it's good for customers. I think it's going to make it easier for them. It's a big piece of why we've invested as significantly as we have in our own shopping assistant in Rufus. And if you haven't checked out Rufus recently, I really encourage you to do so. It's gotten much, much better and keeps getting better every month.
And you know, we have about 3. We have 300 million customers who used Rufus in 2025. Customers who used Rufus are about 60% more likely to complete a purchase. And so you, you just, you know, you're seeing a lot of usage of it and a lot of growth and I think it's very useful.
And you know, I think at the same time we will have relationships with third party horizontal agents that can enable shopping as well. We have to collectively figure out a better customer experience. You know, it's, it's still, you know, these horizontal agents don't have any of your shopping history. They get a lot of the product details wrong. They get a lot of the pricing wrong.
And so, yeah, we have to try to find a customer experience together that's better and, you know, a value exchange to make sense for both parties. But I'm very hopeful that we'll get there over time. We continue to have a number of conversations. And then I think you're going to have to look at as time goes on, you know, which types of, you know, which shopping agents are consumers going to use.
And it kind of reminds me in some ways of the early days of, of kind of all the search engines that were referring traffic to retailers. And you know, it's still a relatively small portion of the overall traffic and sales. But you know, of that fraction, you, you have to ask how many, how many consumers are going to prefer using a horizontal agent where it's kind of a middle person between the retailer and the consumer versus wanting to use a great agent from that retailer that has all its shopping history and then has all the data right there and makes it easy if you're just spearfishing for something to shop for it right there.
Or if you want to do discovery, you can do it there and it's got the best data on shopping. I think a lot of customers are ultimately going to choose to use a great shopping agent from that retailer. Because if you think about what consumers really want in retail and a retailer, they want really broad selection. They want low prices, they want really fast delivery. And then they want a retailer that they can trust and that takes care of them.
And I think horizontal agents are pretty good at aggregating selection, but retailers are much better at doing all four of those of those items. And so I'm very optimistic that that people will use our shopping agent. It's off to a great start. I also expect that we'll work with other third party agents over time as we work on the issues I mentioned earlier.
Operator
Thank you. The next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question.
Brian Nowak
Thanks for my question. Andy, I want to ask you one about the the global retail business this year. I know there's a lot of areas of investment in it that you're talking about to sort of make improve the service, make it more durable over the long term etcetera. But then I'm assuming they're also sources of efficiency you expect to see this year.
So can you sort of help us understand both sides of the Ledger on retail this year? Where are some of the areas where you see the potential sources of efficiency and cost to serve savings and then where should we be taking about the areas of investment to sort of drive more durable growth, you know robotics etcetera. How does that sort of breakdown?
Andy Jassy
Yeah, so I would say on the side of continuing to invest to to keep growing the retail business, you know, the the kind of core drivers of demand continue to be the same. You know, we're, we're going to work really hard to expand selection. And when you've seen what we've done over the last several years in the expand, the expansion of selection and has been broad and you'll see it on both ends of the spectrum.
You know, we're, we have a lot more of those luxury brands that, that have built presences in Amazon had success and found that we could, we could manage their brand presentation the right way. And they've been very happy. I mean, you only have to look at L'Oreal as an example 2 of just, you know, how fast that business is growing and how happy our partners have been.
And at the same time we are working really hard to continue to expand the amount of everyday essentials that we offer our customers. And the the growth in everyday essentials in our business is really remarkable as I mentioned in my opening comments. And you know, one out of three units now that we that we move our our everyday essentials.
And what we find there is that the more the customers can rely on us for, for everyday essentials and, and the lower ASP key items, they they just choose to do more of their downstream shopping with us in, in every way. We're just more front of mind. And so, yeah, I think a big piece of why we have captured more and more of those everyday essentials.
And you see it also in our grocery business with perishables too. It's just our speed of delivery improvements over the last three years has been really remarkable. I mean it's, it's, it's customers. It's the one thing I get stopped on the street most often about, which is I just can't believe how quickly from when I order something, I get it to my door. And how reliable you are.
I think, you know, along that speed of delivery piece, it's also quite interesting what's happening with quick commerce. You know, and, and we have this offering called Amazon Now that we've largely started outside the US and India and the UAE and Mexico that gets thousands of items to customers within 30 minutes. And it really is, it's quite interesting how quickly that is growing.
And I think that it's just another one of those things like everyday essentials that when you're, when you're able to order more and more from Amazon, you just think of Amazon first, if it's, if it's a great experience that we're offering for whatever you're looking for. But in our if you look in India, which is the place we've rolled out quick commerce, the fastest customers who try quick commerce are are shopping with triple the frequency than they did before they tried us a quick commerce.
So those are all areas I think are pretty exciting that we're expanding. You'll see us continue to expand what we're doing in the perishable side too, which we're quite excited about in you know we, we are able to deliver perishables same day and thousands of cities around the world. Now in the cities in which we have those perishables available, nine of the 10 top items that are ordered in that geography are perishables.
So we're just having a lot of success with that too. And people buy perishables from us. After they buy perishables, they're shopping with us twice as frequent frequently. So a lot of good things to like there. And then, you know, on the efficiencies we are, I mean we always have a very long list of these that we're working on, Brian.
And you know, it's true today as well. Like if you look even you know, I mentioned, I talked a lot about regionalization in our fulfillment network and particularly in the US, you know, over the last couple years and I said we weren't done honing that. And that's true. It's just we, you know, we don't talk about it every time, but if you look at what we've done.
We've extended the number of regions you know was 8, it's now 10. We've extended regionalization to what we do with our inbound delivery to be much more efficient, being able to get more items closer to customers more quickly. You know, we have made a lot of, we're doing a lot of work and we made a huge amount of progress in being able to get more units into each box.
And as we're able to get more units into each, each box, it, you know, it obviously saves shipments and, and, and we drive better operating income when we do that. And we've made very significant progress there, but have a lot more plan. It's part of, by the way, that improvement is part of what helps us do things like I was talking about earlier in, in adding to a delivery in near real time.
And then, you know, robotics, as you mentioned, is another big one for us. You know, we have over a million robots today in our fulfillment network. They take care of all sorts of functions, but still a fraction of what I think we're going to be able to enable over time, which will allow our, you know, we'll always have a lot of people that we employ in our fulfillment network, but they'll, you know, they'll leave to the robotics things that, you know, that are more repetitive.
So it's better productivity for the business, more safer teammates and there's real cost efficiencies in that as well. So a lot on both sides of the Ledger, as always.
Operator
Thank you. And our final question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.
Eric Sheridan
Thanks so much for taking the question. Maybe a few parts just on AWS. Can you speak to the current state of your revenue backlog as of Q4? And also discuss a little bit about what you see both for internal use cases and external client needs with respect to any imbalance between supply and demand around AI efforts and how you think about closing the gap on those as more capacity coming online through 2026? Thank you.
Andy Jassy
Yeah, that's a lot of parts. I'll start with the first one, which is on backlog. Our backlog is $244 billion. That's up 40% year over year. I think it's up 22% quarter over quarter. You know, we have and we have a lot of deals that are in the pipeline. There's just as I mentioned earlier, there is a lot of demand for AWS right now in the AI space and also in in the core AWS space.
Your second question was internal and external use cases. I would and, and, and then the impact around supply and demand. You know, the vast majority of our, the capital that we spend and the capacity that we have is consumed by external customers. We have all Amazon has always been a very large AWS customer, very helpful AWS customer because they're very demanding and, and they use the services very extensively and stretch the limits as we launch things.
So they've always been a very important big customer, but always a very small fraction of the total. And that's true today in, you know, in AI as, as well as, you know, the overall AWS business, you know, on, on internally we've all sorts of ways that we are using AI. We have over 1,000 AI applications that we've either deployed or in the process of building.
And they range from our shopping assistant in Rufus that we were just talking about to Alexa Plus, which is a really large scale generative AI application to applications that are fulfillment network that allows to have more accurate forecasting predictions to how we do customer service. And in our customer service chat bot to how we are making it much easier for brands to create advertisements and to optimize all their campaigns across the full funnel of advertising options.
We have to, you know, in live sports, you can if you watch Thursday Night Football, you can see, you know, defensive alerts which predict which player is going to blitz or you know, pocket held. I mean, we in every one of our businesses, you see a very broad use of AI to improve the customer experience and in many cases just to completely reinvent what was possible before.
I mean, it's it's pretty neat to to use something like Lens where you know you, you may see something you want to buy. You can just take a picture of it in the app and it finds the item on the detail page you can buy at one click. It's kind of magic, you know, externally, I would say, you know, it's kind of what I said earlier, earlier, you have AI labs, you know, consuming lots and lots of capacity, both for training as well As for the inference and the research across what they're doing with their different applications and models.
We see enterprises, all sorts of workloads, you know, customer service automation, business process automation, fraud, completely reinventing their their applications, you know, agentic coding applications, legal applications. Suno is a really cool example of an AWS customer that's kind of reinvented how you can write music and build music. So really across the board, and yeah, and I just think on the supply and demand, what I would tell you is, you know, we're growing 24% year over year on $142 billion annualized run rate business.
So we're growing at really an unprecedented rate. Yeah, I think every provider would tell you including us that we could actually grow faster if we had all the supply that we could take. And so we are we are being incredibly scrappy around that. If you look, you know in the last 12 months we added 3.99 gigawatts of power. Just for perspective, that's twice what we had in 2022 and we were an $80 billion annual run rate business.
We expect to double it again by the end of 27. We added 1.2 gigawatts of of power in Q4, just quarter of 1/4. So it's so we, you know, we are, our team is being aggressive and scrappy, inventive and adding capacity as fast as we can. I, you know, we'll add a lot more in 26 and 27 and in 28 for that matter. And and we're very optimistic we can continue to grow in the ballpark of what we have.
Operator
Thanks for joining us on the call today for your questions. A replay will be available on our Investor Relations website for at least three months. We appreciate your interest in Amazon and we look forward to talking with you again next quarter.
Details at Amazon IR
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