Amazon is again ramping up spending on its vast fulfillment network as the online retailer and technology giant pushes to boost e-commerce sales by expanding quick deliveries across the United States.
Seattle-based Amazon has been increasing its spending throughout the first half of the year, paying $30.5 billion for capital expenditures and equipment finance leases on data centers and other facilities, the company said in reporting its most recent earnings.
The company expects to exceed that amount in the second half, mainly to expand its Amazon Web Services cloud infrastructure and data center network, Chief Financial Officer Brian Olsavsky told investors on a conference call.
The firm also increased its cash paid for property and other operating leases to $6.2 billion in the first six months of the year from about $5 billion during the same time in 2023. The company expects that effort to continue.
Amazon is not done honing the regionalization of its fulfillment network aimed at lowering its cost of delivery to customers, CEO Andy Jassy said on the call.
Amazon has expanded same-day delivery to more than 120 metropolitan areas across the country, and has reached its fastest Prime delivery speeds in record this year, with more than 5 billion items arriving the same or next day globally — an increase of more than 30% year over year, according to a blog post this week by Udit Madan, vice president of Amazon Worldwide Operations.
Amazon’s total revenue increased 10% to $148 billion in the second quarter from the year-earlier period. The company's stock fell early Friday amid some analyst concerns that Amazon's spending won't be supported by its revenue growth this year.
From Groceries to AI
The company is expanding its grocery deliveries after launching a subscription service for Prime members across the U.S. to provide free delivery on orders over $35 to Amazon Fresh and its Whole Foods Market grocery chain.
Amazon has joined other tech giants such as Microsoft and Google parent Alphabet in ramping up investments in research and infrastructure facilities including data centers and chips to handle the immense computing power requirements of its emerging cloud and generative artificial intelligence.
Amazon, one of the world's largest users of warehouse space, is ramping up property investments after cutting back on warehouse and transportation spending in 2023. The company spent a total of $45.9 billion on its fulfillment operations in the first six months of 2024, up from $42.2 billion in the prior period.
The company is still expanding its global warehouse footprint that totals more than 624 million square feet across roughly 2,500 facilities, according to MWPVL International, a supply chain consulting firm that tracks Amazon distribution facilities.
The company had 170 facilities totaling another 64.1 million square feet under development as of March 31 in the United States alone, according to MWPVL's data. About 60% of the facilities under construction as of the first quarter were smaller package delivery centers averaging about 160,000 square feet. Another 21 package sorting centers averaging just under 700,000 square feet were also in development, according to the data.
Amazon is also expanding its big-box distribution network. The company had 18 large fulfillment centers of 1 million square feet or more under development or planning as of the first quarter, a total of 14.6 million square feet, according to MWPVL's most recent data.