M+E Connections

Amazon Web Services (AWS) was again a major contributor to Amazon’s strong results in the first quarter ended March 31 as AWS segment sales increased 16% from a year ago to $21.4 billion, the company said April 27.

Total Amazon revenue increased 9% to $127.4 billion from $116.4 billion a year ago.

In AWS, Amazon is now seeing an annualized sales run rate of over $85 billion, Brian Olsavsky, Amazon CFO told analysts on an earnings call.

“As a reminder, we’re not trying to optimize for any one quarter or year,” he said, adding: “We’re working to build customer relationships and a business that will outlast all of us. Therefore, our AWS sales and support teams continue to spend much of their time helping customers optimize their AWS spend so that they can better weather this uncertain economy.”

In a rare appearance on an Amazon earnings call, CEO Andy Jassy told analysts: “In AWS, what we’re seeing is enterprises continuing to be cautious in their spending in this uncertain time.”

But Jassy added: “We’ve spent a fair bit of time analyzing what we’re seeing, and I’ve spent a good chunk of time myself looking as well, and we like the fundamentals of what we’re seeing in AWS. The new customer pipeline looks strong. The set of ongoing migrations of workloads to AWS is strong. The product innovation and delivery is rapid and compelling. And people sometimes forget that 90-plus percent of global IT spend is still on-premises. If you believe that equation is going to flip, which we do, it’s going to move to the cloud. And having the cloud infrastructure offering with the broadest functionality by a fair bit, the best securing operational performance and the largest partner ecosystem bodes well for us moving forward.”

Amazon is, however, “not close to being done inventing in AWS,” he went on to say. “Our recent announcement on large language models and generative AI and the chips and managed services associated with them” are among the recent examples, he said.

“In my opinion,” he told analysts: “Few folks appreciate how much new cloud business will happen over the next several years from the pending deluge of machine learning that’s coming.”

During the Q&A, Olsavsky explained that Amazon plans to spend a lot on large language models and generative AI, “so, we’re creating some space in our fulfillment and transportation” capital expenditures “number that has been repurposed over to AWS.”

But he was quick to add: “We still think the combined CapEx will be lower year-over-year.”

Elaborating on what he said earlier on the call, Jassy said: “We’re spending a lot of time with customers trying to help them think of smart ways, not short-term ways, but smart ways to optimize their costs and to be able to scale up and down. And again, one of the big advantages of the cloud is that if you grow quickly, you can seamlessly scale up but, when you don’t have the demand, you can give it back to us and stop paying for it, and that is not true with what you see on-premises.”