Amazon's cloud business reports 20% growth in fourth quarter, missing estimates

Amazon mentioned income in its cloud unit elevated by 20% within the fourth quarter, a slower tempo than analysts had projected and extra sluggish than the 27.5% development fee within the third quarter.

Cloud development seems to be moderating together with different elements of the expertise trade that boomed over the previous decade and accelerated within the pandemic, when companies adopted companies that might foster distant work.

Amazon Web Services leads the cloud infrastructure market, with virtually 39% share in 2021, in accordance with estimates from trade researcher Gartner. Microsoft’s Azure enterprise and Google Cloud are AWS’ prime opponents.

Microsoft mentioned final week that income from Azure and different cloud companies, which the corporate would not report in {dollars}, grew by 31% from the prior yr, down from 35% within the earlier interval. Google mother or father Alphabet stories earnings after the bell on Thursday.

Revenue development at AWS has usually decelerated since 2015 because the section has turn into bigger and competitors has picked up. In the fourth quarter, AWS generated $21.4 billion in income, representing 14% of complete Amazon income. Analysts polled by StreetAccount had anticipated $21.87 billion in AWS income.

In an interview late final yr on the firm’s annual Reinvent buyer convention, AWS CEO Adam Selipsky mentioned “we do see some customers who are doing some belt-tightening now.”

Brian Olsavsky, Amazon’s finance chief, mentioned on a convention name with analysts that decrease mortgage volumes, cryptocurrency costs and promoting spending are inflicting decrease cloud spending for some prospects.

“By and large, 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 mentioned.

But the AWS buyer pipeline may be very wholesome, mentioned Andy Jassy, Amazon’s CEO and previously the top of AWS. Jassy joined the convention name for the primary time since he changed Jeff Bezos as CEO in 2021. Migrations are nonetheless scheduled to occur, Jassy mentioned.

“To our best estimations, when we look at the absolute dollar growth year-over-year, we still have significantly more absolute dollar growth than anybody else we see in this space,” Jassy mentioned.

The AWS division ended up with $5.2 billion in working earnings for the quarter, virtually double the revenue quantity for the total firm. But it was down by virtually 2%. This was the primary quarter since at the very least 2015 through which AWS failed to extend its working earnings yr over yr. The standalone AWS working margin, at 24.3%, has not been this slender since 2017.

In November, AWS launched supply-chain, clean-room and safety information storage companies at its Reinvent convention. Also within the quarter, AWS introduced the provision of knowledge middle areas in Spain and Switzerland.

Analysts at Oppenheimer, who’ve the equal of a purchase score on Amazon, wrote in a report this week that their analysis indicated purchasers had been transferring to discounted time period contracts, optimizing workloads and seeing lighter utilization as “the digital economy reverts somewhat back to in-person.”

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