Amazon's devices business faces $612M loss as memory costs force 'difficult trade-offs'

Amazon's Devices and Services team, led by Panos Panay, is now projecting a $612 million gross loss this year on its first-party devices business. That is the sobering takeaway from an internal planning document obtained by Business Insider, which shows leadership had targeted a $438 million loss. The gap is driven partly by rising memory costs, which the document says are 'putting pressure' on profitability and forcing 'difficult trade-offs' among sales volumes, average selling prices, and gross profit. The $612 million figure is at the gross profit level, so it does not include R&D, sales and marketing, or administrative costs. An Amazon spokesperson declined to comment.

Amazon is not alone in feeling the squeeze. Apple has raised prices on some Macs and iPads; Microsoft and Sony have raised console prices. Dell, HP, and Lenovo are also facing higher memory costs. The driver is the same AI boom powering Amazon's cloud ambitions: huge data center investments have increased demand for memory chips, while manufacturers have devoted more capacity to high-bandwidth memory used in AI servers. That has tightened supply and raised prices for components across consumer electronics.

The timing is awkward for Amazon's hardware strategy. The company has historically used low-cost devices as a gateway into its shopping and content ecosystem, accepting thin margins in exchange for engagement. But the October launch wave shows Amazon still pushing into new categories: new Kindles, Alexa-powered tablets, Ring smart locks, and AI wearables under its Bee brand. The August planning document reportedly identified Bee and new smart glasses as strategic products still in an investment phase, meaning they are not expected to carry the profit line yet.

The most visible shift is in tablets. Earlier this month, Amazon phased out Fire tablets after 15 years and replaced the budget line with Alexa Tablets powered by Alexa+. The new devices start at $229.99 and go up to $499.99, a notable jump from previous generations. In August, the same month the planning document was prepared, Amazon also raised prices on Echo speakers, Kindle e-readers, and Fire TV devices. Those moves are consistent with the trade-off logic in the document: when component costs rise, either volume, price, or profit gives way.

The document also shows Amazon wrestling with the cost of running Alexa+ at scale. Business Insider reported in July that internal forecasts put Alexa+'s AWS cloud costs at roughly $1.7 billion in 2026, nearly triple the prior year's figure. Amazon has been working to lower those costs by relying less on Anthropic's AI models and routing more requests to its own, cheaper systems. A separate project called Moonraker, designed to give Alexa more advanced AI-agent capabilities, was projected to require more than $100 million in GPU spending this year. Business Insider previously reported that Amazon internally considered delaying or scaling back Moonraker as one option for easing cost pressure.

Amazon is living both sides of the AI boom. The company expects roughly $220 billion in capital expenditures this year, largely to expand AWS data centers for AI demand. At the same time, higher component costs are squeezing the consumer hardware business that feeds customers into Amazon's ecosystem. The result is a company spending aggressively on AI infrastructure while its devices division absorbs the supply-side consequences of that same boom.

For executives in hardware, the stakes are straightforward: the AI-driven memory shortage is not just a data center procurement issue. It is showing up in consumer price tags, product line decisions, and profit forecasts. Amazon's decision to retire the Fire tablet line and push Alexa Tablets upmarket is one early example of how an AI capex cycle can force strategic repositioning in unrelated product categories. The 'difficult trade-offs' in Amazon's planning document are now visible in the wider industry: Apple, Microsoft, Sony, Dell, HP, and Lenovo are all making similar calculations.