Amazon announced that revenue from its cloud business grew by 20 percent during the fourth quarter, less than what analysts had expected and slower than the 27.5 percent growth rate seen during the 3rd quarter.
Cloud growth is slowing down, as are other aspects of the technology sector which exploded in the last decade, and increased in the midst of the epidemic, as businesses have embraced services that can facilitate remote work.
Amazon Web Services leads the cloud infrastructure market with an almost 39% market share by 2021, according estimates from the industry research firm Gartner. Microsoft’s
Google Cloud Business, Azure and Google
Cloud are AWS one of the best competitors.
Microsoft announced last week that the revenue generated by Azure and other cloud-based services, which it does not track in dollars, increased by 31% over the year before, and fell from 35% during the prior period. Google parent Alphabet announces earnings following the hour on Thursday.
The growth in revenue at AWS has generally slowed in the past year as the business has grown and competition has grown. The fourth quarter of the year saw AWS produced $21.4 billion of revenue which is 14% of all Amazon revenue. Analysts surveyed by StreetAccount were expecting $21.87 billion of AWS revenue.
In an interview in the year, during the annual Reinvent customer conference, AWS CEO Adam Selipsky stated that “we do have customers who are tightening their belts right currently.”
Brian Olsavsky, Amazon’s finance chief, told an analyst conference call that the lower volume of mortgages, the prices of cryptocurrency, and advertising expenditures are leading to decreased cloud spending by some customers.
“By all accounts it’s simply an interest and prioritization for our customers to reduce their spending down when they are entering the economic recession,” Olsavsky said.
However, it appears that the AWS customers’ pipelines are well-maintained, according to Andy Jassy, Amazon’s CEO and previously the director of AWS. Jassy was on the phone for the first time in his tenure since he was replaced by Jeff Bezos as CEO in 2021. The transfer is still scheduled to take place, Jassy said.
“To our best estimates looking at the dollar growth rate year-over year we have greater absolute growth in dollars than any other company we can see in this sector,” Jassy said.
The AWS division raked in $5.2 billion of operating profits in the last quarter, nearly more than double the profit figure for the entire company. However, it was down nearly two percent. It was the first quarter since at the very least 2015 that AWS has not been able to grow its operating earnings year-over-year. The stand-alone AWS operating margin of 24.3 percent, hasn’t been this low since the year 2017.
The month of November was when AWS launched supply chain, clean room and security storage options during their Reinvent conference. In the same trimester, AWS announced the availability of data center locations within Spain as well as Switzerland.
Analysts from Oppenheimer which has the equivalent of an A-grade rating on Amazon In the report released last week, that study showed that customers were shifting into discounted contracts for term, maximizing the workload and seeing less usage in the event that “the digital economy is slowly reverting to traditional offline.”