- Amazon Web Services exceeded analysts’ profit expectations in the quarter, with revenue in line with predictions.
- In the same period, AWS strengthened its partnership with Nvidia and unveiled a new artificial intelligence training chip.
Amazon Web Services CEO Adam Selipsky addressed attendees at the CERAWeek by S&P Global conference in Houston, Texas, on March 7, 2023.
F. Carter Smith | Bloomberg | Getty Images
On Thursday, Amazon announced that its cloud division saw a 13% year-over-year revenue growth in the fourth quarter, meeting analysts’ forecasts precisely. The company attributed this growth to the increasing demand for cloud services related to artificial intelligence.
In response to the rising corporate interest in generative AI capabilities following OpenAI’s ChatGPT chatbot launch in late 2023, many tech giants, including Amazon Web Services, rushed to introduce new products or enhance existing ones. In the fourth quarter, AWS unveiled the Q chatbot for developers and non-technical corporate users, along with the Trainium2 chip designed for AI model training.
AWS reported $24.20 billion in revenue for the quarter, matching the expectations of analysts surveyed by StreetAccount. The growth rate accelerated from 12% in the previous quarter.
“We anticipate this growth momentum to persist into 2024,” stated Brian Olsavsky, Amazon’s Chief Financial Officer, during a call with reporters.
However, despite this growth, AWS faced stiffer competition from its U.S. counterparts in the fourth quarter. Microsoft’s Azure and other cloud services experienced a 30% revenue increase, while Google Cloud’s revenue, inclusive of Google Workspace subscriptions, surged by approximately 26%.
As interest rates rose, prompting economic concerns, many companies focused on optimizing cloud resource spending. Nonetheless, this trend has started to diminish.
“While cost optimization efforts continued, we also observed an acceleration in larger new deals,” noted Amazon CEO Andy Jassy during the earnings call. He highlighted that clients are committing to larger contracts over extended periods, leading to a growth in migrations.
The operating income for Amazon’s cloud division reached \(7.17 billion, marking a 38% increase and surpassing the StreetAccount consensus of \)6.93 billion. This translates to AWS contributing 54% to Amazon’s total operating income of $13.21 billion.
Currently, AWS constitutes 14% of Amazon’s overall revenue.
During the AWS Reinvent conference in Las Vegas in November, Adam Selipsky, who has been leading Amazon’s cloud division since 2021, welcomed Nvidia CEO Jensen Huang to announce an expanded partnership. This collaboration included a set of Nvidia graphics processing units available for Nvidia and cloud clients. Huang has also maintained GPU supplies to Google and Microsoft, among other cloud infrastructure providers.
Amazon highlighted significant AI wins for AWS during the quarter, including partnerships with companies like Accor S.A., Mitsubishi UFJ Financial Group, Salesforce, and The Very Group.
“Gen AI remains a focal point of investment and innovation across Amazon, as it presents numerous opportunities to transform customer experiences and processes, potentially driving billions in revenue for Amazon in the coming years,” Jassy emphasized during the earnings call.
Effective January, Amazon extended the server lifespan from five to six years, a move expected to boost first-quarter operating income by $900 million, as announced by Olsavsky during the earnings call. Similar adjustments were made by Amazon in 2020 and 2022.
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