Dive Brief:
- Amazon plans to keep helping AWS customers economize, the company said during its Q4 earnings call Thursday. “Our customers are looking for ways to save money, and we spend a lot of our time trying to help them do so,” said Brian Olsavsky, Amazon’s CFO.
- While AWS reported $21.4 billion in sales for the quarter, revenue growth steadily declined over the year, from 37% in Q1 to 20% year over year in the three-month period ending Dec. 31.
- “Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions,” Olsavsky said. “As expected, these optimization efforts continued into the fourth quarter.”
Dive Insight:
Despite contracting growth, AWS revenue buoyed its parent company’s overall performance for the year. Amazon posted a net loss of $2.7 billion, as compared to net gains of $33.4 billion in 2021.
In contrast, AWS segment sales increased 29% year-over-year to $80.1 billion, yielding $22.8 billion in operating income, up from $18.5 billion the previous year.
“Our new customer pipeline remains healthy and robust, and there are many customers continuing to put plans in place to migrate to the cloud and commit to AWS over the long term,” Olsavsky said, while acknowledging AWS’s year-over-year revenue growth was in the mid-teens in January.
AWS is the largest of the hyperscalers that dominate the U.S. market. Like its closest competitors, Microsoft and Google Cloud, AWS has experienced declining growth rates, as enterprises adjust to ongoing macroeconomic challenges.
One of the advantages of cloud is elasticity. Businesses can ramp up usage when needed and scale back when times are tough.
While the contraction is industry agnostic, Olsavsky pointed to financial services as an acutely impacted sector. With mortgage volumes falling, the demand for compute declined as well.
“What we’re seeing is just an interest and a priority by our customers to get their spend down as they enter an economic downturn,” Olsavsky said. “We’re doing the same thing at Amazon, questioning our infrastructure expenses as well as everything else.”
Last month, Amazon announced it would be laying off over 18,000 workers as part of a broader effort to allocate resources more effectively. In his opening remarks, Olsavsky confirmed that the positions eliminated were primarily in “stores and device businesses, as well as our human resource teams.”
