This week on the GeekWire Podcast: Why is Amazon laying off 14,000 people in the middle of an AI boom — and is it really a boom at all? We dig into the contradiction at the heart of Seattle’s tech scene, discussing Amazon CEO Andy Jassy’s “world’s largest startup” rationale and what it says about the company’s culture and strategy. And we debate whether AI progress represents true transformation or the familiar signs of a tech bubble in the making.

Then we examine the vision of Cascadia high-speed rail — the ambitious plan to connect Portland, Seattle, and Vancouver, B.C., by bullet train. Is it the regional infrastructure needed to power the Pacific Northwest’s next chapter, or an expensive dream looking for a purpose?

With GeekWire co-founders John Cook and Todd Bishop

Related headlines from the week

Amazon layoffs

• Amazon confirms 14,000 job cuts, says push for ‘efficiency gains’ will continue into 2026
• A tale of two Seattles in the age of AI: Harsh realities and new hope for the tech community
• Filing: Amazon cuts more than 2,300 jobs in Washington state as part of broader layoffs
• Amazon layoffs hit software engineers hardest in Washington
• Amazon layoffs reaction: ‘Thought I was a top performer but guess I’m expendable’
• Amazon CEO says massive corporate layoffs were about agility — not AI or cost-cutting

Amazon earnings

• Amazon stock soars 11% after topping Q3 estimates with $180B in revenue, $21B in profits
• Amazon’s Anthropic investment boosts its quarterly profits by $9.5B
• ‘Big Beautiful’ tax benefit: Amazon and other tech giants reap the rewards of new law, for now

Microsoft Azure, earnings and OpenAI

• Microsoft’s Azure reports cloud outage, disrupting global customers including Alaska Airlines
• Microsoft beats expectations, reports nearly $35B in Q1 capital spending amid Azure outage
• Microsoft gets 27% stake in OpenAI, and a $250B Azure commitment

Seattle-Portland-Vancouver

• Slowly but surely, high-speed rail backers believe Cascadia mega-project will become a reality
• Cascadia’s AI paradox: A world-leading opportunity threatened by rising costs and a talent crunch
• The ‘enormous barrier’ that threatens economic growth in the Pacific Northwest
• Beta’s unique electric airplane flies into Seattle to wow state officials and aviation experts

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Amazon’s cash tax bill has dropped sharply this year under a new U.S. tax law that lets companies immediately deduct the cost of equipment and research — a policy designed to encourage spending on technology development and other investments.

The decrease is detailed in the company’s third-quarter 10-Q filing, released Friday morning following its blockbuster earnings report. Amazon’s shares rose more than 10% in early trading after beating expectations and reassuring investors about long-term AI demand.

In the filing, Amazon cites the “One Big Beautiful Bill Act of 2025” as a key factor in the tax deduction. The situation illustrates how tax changes championed by President Trump and the Republican-led Congress are rewarding U.S. investment and reshaping corporate finances.

But it’s not as simple as a basic tax break: while the law accelerates short-term deductions for domestic investment, it also changes the tax treatment on foreign profits — boosting long-term tax liabilities overall.

According to its quarterly filing, Amazon paid $1.1 billion in cash for income taxes in the third quarter, a 45% decrease from the $2 billion it paid in the same period last year — even as quarterly profits rose 38% to $21.2 billion. For the first nine months of 2025, cash tax payments fell to $6.8 billion, down from $8.2 billion in 2024.

The new law changed two key rules that impact companies making big capital investments.

• First, it reinstated 100% “bonus depreciation,” allowing companies to deduct the full cost of new equipment — such as servers for AWS and AI or warehouse robotics — in the year it’s purchased rather than spreading the deduction over many years.
• Second, it restored the immediate expensing of domestic R&D costs, reversing a recent rule that required this spending to be amortized over several years.

Boosting capital spending and cutting jobs

For a company like Amazon, these changes create a significant and immediate reduction in taxable income. The tech giant spent $35.1 billion on property and equipment in the third quarter, up 55% from a year earlier, driven by massive investments in AI infrastructure.

Backers of the U.S. tax changes said they would spur investment and job creation in the United States, but Amazon’s situation shows that the reality is more complicated. The company is reaping the benefits of the new tax incentives while eliminating about 14,000 corporate jobs. 

Speaking on Amazon’s earnings call, CEO Andy Jassy attributed the layoffs not to cost-cutting but to efforts to simplify operations and reduce bureaucracy after years of growth. Amazon took a $1.8 billion pre-tax charge in the quarter for severance and other costs related to the layoffs.

Amazon isn’t alone in spending big on AI infrastructure or benefitting from the tax changes.

Although they didn’t go into as much detail as Amazon did, Microsoft and Google both referenced the 2025 U.S. tax law in their latest quarterly reports, noting the reinstatement of immediate R&D expensing and accelerated depreciation. Both companies are realizing similar near-term tax benefits as they expand their AI and cloud infrastructure investments.

Long-term tax provision still intact

For Amazon, the changes in U.S. tax law mark a new chapter in a long-running national debate. The company, which faced criticism in years past for paying little or no federal income tax despite strong profits, has long maintained that it pays what it owes under U.S. law.

However, the immediate reduction is only part of the picture.

While Amazon’s cash payments declined, the tax expense reported on its income statement — a figure based on accounting rules rather than cash paid — nearly doubled. The company’s income-tax provision for the first nine months of 2025 was $14.1 billion, up from $6.9 billion in the same period last year.

Amazon’s filing says this increase was also driven by the new tax act, which reduced other benefits, such as the deduction for profits made overseas. 

This $7.3 billion gap between its accounting provision ($14.1 billion) and its cash tax bill ($6.8 billion) shows how the new law shifts the timing of tax payments rather than eliminating them. In effect, the deductions reduce the company’s cash outlay for taxes in the short term but will ultimately be paid in future years as those assets are depreciated on the company’s books.

Amazon’s third-quarter profits rose 38% to $21.2 billion, but a big part of the jump had nothing to do with its core businesses of selling goods or cloud services.

The company reported a $9.5 billion pre-tax gain from its investment in the AI startup Anthropic, which was included in Amazon’s non-operating income for the quarter.

The windfall wasn’t the result of a sale or cash transaction, but rather accounting rules. After Anthropic raised new funding in September at a $183 billion valuation, Amazon was required to revalue its equity stake to reflect the higher market price, a process known as a “mark-to-market” adjustment.

To put the $9.5 billion paper gain in perspective, the Amazon Web Services cloud business — historically Amazon’s primary profit engine — generated $11.4 billion in quarterly operating profits.

At the same time, Amazon is spending big on its AI infrastructure buildout for Anthropic and others. The company just opened an $11 billion AI data center complex, dubbed Project Rainier, where Anthropic’s Claude models run on hundreds of thousands of Amazon’s Trainium 2 chips.

Amazon is going head-to-head against Microsoft, which just re-upped its partnership with ChatGPT maker OpenAI; and Google, which reported record cloud revenue for its recent quarter, driven by AI. The AI infrastructure race is fueling a big surge in capital spending for all three cloud giants.

Amazon spent $35.1 billion on property and equipment in the third quarter, up 55% from a year earlier.

Andy Jassy, the Amazon CEO, sought to reassure Wall Street that the big outlay will be worth it.

“You’re going to see us continue to be very aggressive investing in capacity, because we see the demand,” Jassy said on the company’s conference call. “As fast as we’re adding capacity right now, we’re monetizing it. It’s still quite early, and represents an unusual opportunity for customers and AWS.”

The cash for new data centers doesn’t hit the bottom line immediately, but it comes into play as depreciation and amortization costs are recorded on the income statement over time.

And in that way, the spending is starting to impact on AWS results: sales rose 20% to $33 billion in the quarter, yet operating income increased only 9.6% to $11.4 billion. The gap indicates that Amazon’s heavy AI investments are compressing profit margins in the near term, even as the company bets on the infrastructure build-out to expand its business significantly over time.

Those investments are also weighing on cash generation: Amazon’s free cash flow dropped 69% over the past year to $14.8 billion, reflecting the massive outlays for data centers and infrastructure.

Amazon has invested and committed a total of $8 billion in Anthropic, initially structured as convertible notes. A portion of that investment converted to equity with Anthropic’s prior funding round in March.

Microsoft reported fiscal first-quarter revenue and profits ahead of analysts’ expectations on Wednesday, with Azure revenue growth climbing to 40%.

The earnings report came as the company continued to deal with the lingering effects of a widespread cloud outage that started earlier in the day.

The company’s capital expenditures reached a record $34.9 billion — reflecting its long-term buildout of cloud infrastructure to meet demand for artificial intelligence. That was up from $24.2 billion in Q4. Microsoft had projected capital spending of more than $30 billion for Q1.

Along with that unprecedented buildout, Microsoft sought to address investor concerns about a potential AI bubble, by highlighting its commercial remaining performance obligation (RPO), a measure of future contracted revenue. That backlog grew 51% year-over-year to $392 billion.

The company also disclosed for the first time that this RPO has a weighted average duration of roughly two years, a move intended to show investors that its record capital spending is supported by strong, long-term customer demand.

Revenue was $77.7 billion for the quarter ended Sept. 30, Microsoft’s first quarter of fiscal 2026. That was up 18%, and compared with average analyst expectations of $75.39 billion. The company said the result was driven by strong demand for cloud and AI services.

Profits were $27.7 billion, or $3.72 per share, beating expectations of $3.66 per share.

Earlier Wednesday, an Azure cloud services outage disrupted operations for customers worldwide including Alaska Airlines, Xbox users and Microsoft 365 subscribers. Microsoft reported as of early afternoon that it was rolling back the faulty configuration and that customers should see improvements.

Microsoft stock was down by about 3% in after-hours trading. The company’s market value reached $4 trillion after the announcement of its new OpenAI deal on Tuesday morning.

With a new OpenAI partnership in hand, Microsoft is going into its earnings report Wednesday afternoon with a resolution to one of the biggest questions about its business.

The company’s market value reached $4 trillion again as Wall Street reacted to the details of the new Microsoft-OpenAI agreement, which gives Microsoft a 27% equity stake in OpenAI’s new for-profit entity, and a commitment for $250 billion in cloud purchasing by the ChatGPT maker.

Analysts expect the tech giant to report another strong quarter, fueled primarily by continued momentum in its Azure cloud business and growing adoption of its Copilot AI tools.

Quarterly revenue is expected to be about $75.4 billion for the first quarter of Microsoft’s 2026 fiscal year, which ended Sept. 30, according to numbers tracked by Yahoo Finance. That would represent a 15% jump compared to the $65.6 billion reported in the same period last year. 

Analysts expect earnings per share of $3.66, up about 11% year-over-year from $3.30.

Investors will be paying close attention to the growth rate in Microsoft’s Azure cloud business, with some analysts expecting as much as 39% growth (in constant currency, excluding the impact of exchange rates). Hitting this mark would exceed the company’s prior guidance and maintain the 39% growth pace set in the previous quarter.

Yet the potential for an AI bubble will no doubt be the focus of questions on company’s earnings conference call. Amid surging investment and growing valuations in the AI sector, some analysts and tech leaders are warning that the enthusiasm could outpace the business realities

Microsoft and Google parent Alphabet will both report numbers on Wednesday afternoon, and Amazon the following day, making for quick comparisons across the major cloud platforms.

As of the most recent quarter, ended in June, Microsoft reported more than $75 billion in annual Azure revenue for its just-ended fiscal year, compared to an annual run rate that had surpassed $50 billion for Google Cloud and a run rate of nearly $124 billion for Amazon Web Services (based on its $30.9 billion revenue in the June quarter).

Check back with GeekWire on Wednesday afternoon for full coverage.

Amazon will lay off 2,303 corporate employees in Washington state, primarily in its Seattle and Bellevue offices, according to a filing with the state Employment Security Department that provides the first geographic breakdown of the company’s 14,000 global job cuts.

A detailed list included with the state filing shows a wide array of impacted roles, including software engineers, program managers, product managers, and designers, as well as a significant number of recruiters and human resources staff. 

Senior and principal-level roles are among those being cut, aligning with a company-wide push to use the cutbacks to help reduce bureaucracy and operate more efficiently.

Amazon announced the cuts Tuesday morning, part of a larger push by CEO Andy Jassy to streamline the company. Jassy had previously told Amazon employees in June that efficiency gains from AI would likely lead to a smaller corporate workforce over time.

In a memo from HR chief Beth Galetti, the company signaled that further cutbacks will continue into 2026. Reuters reported Monday that the number of layoffs could ultimately total as many as 30,000 people, which is still possible as the layoffs continue into next year.

Seattle is looking to celebrate and accelerate its leadership in artificial intelligence at the very moment the first wave of the AI economy is crashing down on the region’s tech workforce.

That contrast was hard to miss Monday evening at the opening reception for Seattle AI Week 2025 at Pier 70. On stage, panels offered a healthy dose of optimism about building the AI future. In the crowd, buzz about Amazon’s impending layoffs brought the reality of the moment back to earth.

A region that rose with Microsoft and then Amazon is now dealing with the consequences of Big Tech’s AI-era restructuring. Companies that hired by the thousands are now thinning their ranks in the name of efficiency and focus — a dose of corporate realism for the local tech economy.

The double-edged nature of this shift is not lost on Washington Gov. Bob Ferguson.

“AI, and the future of AI, and what that means for our state and the world — each day I do this job, the more that moves up in my mind in terms of the challenges and the opportunities we have,” Ferguson told the AI Week crowd. He touted Washington’s concentration of AI jobs, saying his goal is to maximize the benefits of AI while minimizing its downsides.

Seattle AI Week, led by the Washington Technology Industry Association, was started last year after a Forbes list of the nation’s top 50 AI startups included none from Seattle, said the WTIA’s Nick Ellingson, opening this year’s event. That didn’t seem right. Was it a messaging problem?

“A bunch of us got together and said, let’s talk about all the cool things happening around AI in Seattle, and let’s expand the tent beyond just tech things that are happening,” Ellingson explained.

So maybe that’s the best measuring stick: how many startups will this latest shakeout spark, and how can the Seattle region’s startup and tech leaders make it happen? Can the region become less dependent on the whims of the Microsoft and Amazon C-suites in the process? 

“Washington has so much opportunity. It’s one of the few capitals of AI in the world,” said WTIA’s Arry Yu in her opening remarks. “People talk about China, people talk about Silicon Valley — there are a few contenders, but really, it’s here in Seattle. … The future is built on data, on powerful technology, but also on community. That’s what makes this place different.”

And yet, “AI is a sleepy scene in Seattle, where people work at their companies, but there’s very little activity and cross-pollinating outside of this,” said Nathan Lambert, senior research scientist with the Allen Institute for AI, during the opening panel discussion.

No, we don’t want to become San Francisco or Silicon Valley, Lambert added. But that doesn’t mean the region can’t cherry-pick some of the ingredients that put Bay Area tech on top.

Whether laid-off tech workers will start their own companies is a common question after layoffs like this. In the Seattle region at least, that outcome has been more fantasy than reality. 

This is where AI could change things, if not with the fabled one-person unicorn then with a bigger wave of new companies born of this employment downturn. Who knows, maybe one will even land on that elusive Forbes AI 50 list. (Hey, a region can dream!)

But as the new AI reality unfolds in the regional workforce, maybe the best question to ask is whether Seattle’s next big thing can come from its own backyard again.

Related: Ferguson’s AI balancing act: Washington governor wants to harness innovation while minimizing harms

Microsoft and OpenAI announced the long-awaited details of their new partnership agreement Tuesday morning — with concessions on both sides that keep the companies aligned but not in lockstep as they move into their next phases of AI development.

Under the arrangement, Microsoft gets a 27% equity stake in OpenAI’s new for-profit entity, the OpenAI Group PBC (Public Benefit Corporation), a stake valued at approximately $135 billion. That’s a decrease from 32.5% equity but not a bad return on an investment of $13.8 billion.

At the same time, OpenAI has contracted to purchase an incremental $250 billion in Microsoft Azure cloud services. However, in a significant concession in return for that certainty, Microsoft will no longer have a “right of first refusal” on new OpenAI cloud workloads.

Microsoft, meanwhile, will retain its intellectual property rights to OpenAI models and products through 2032, an extension of the timeframe that existed previously. 

A key provision of the new agreement centers on Artificial General Intelligence (AGI), with any declaration of AGI by OpenAI now subject to verification by an independent expert panel. This was a sticking point in the earlier partnership agreement, with an ambiguous definition of AI potentially triggering new provisions of the prior arrangement. 

Microsoft and OpenAI had previously announced a tentative agreement without providing details. More aspects of the deal are disclosed in a joint blog post from the companies.

Shares of Microsoft are up 2% in early trading after the announcement. The company reports earnings Wednesday afternoon, and some analysts have said the uncertainty over the OpenAI arrangement has been impacting Microsoft’s stock.