Amazon revises server lifespan amid AI shift, impacting 2025 earnings
The transition from CPUs to GPUs and accelerated AI-driven innovation shortens server depreciation cycles, signaling a broader industry shift
On February 7, 2025, Amazon (Ticker: AMZN) revised the useful life of certain servers and networking equipment from six to five years, effective January 1, 2025, which is expected to reduce 2025 operating income by $0.7 billion. Additionally, Amazon decided to retire some equipment early, leading to $920 million in accelerated depreciation in Q4 2024 and an anticipated $0.6 billion reduction in 2025 operating income.
From Amazon’s 10-K (emphasis added):
“We completed our most recent servers and networking equipment useful life study in Q4 2024, and are changing the useful lives of a subset of our servers and networking equipment, effective January 1, 2025, from six years to five years. For those assets included in “Property and equipment, net” as of December 31, 2024, whose useful life will change from six years to five years, we anticipate a decrease in 2025 operating income of approximately $0.7 billion. We expect to continue to acquire more of these server and networking assets in 2025. In 2024, we also determined, primarily in the fourth quarter, to retire early certain of our servers and networking equipment. We recorded approximately $920 million of accelerated depreciation and related charges for the quarter ended December 31, 2024 related to these decisions. The accelerated depreciation will continue into 2025 and decrease operating income by approximately $0.6 billion in 2025. “
Accounting rules treat changes in depreciable life as a change in accounting estimate, reported prospectively. Notably, in 2024, Amazon and other technological giants such as Alphabet, Microsoft, and Meta have extended the useful life of servers and networking equipment from four to five or even six years, cutting depreciation expenses by billions.