M+E Connections

Amazon CEO: AWS Made Strides With Growth, Generative AI in Q3

Amazon Web Services helped give parent Amazon a boost in the third quarter ended Sept. 30 as “AWS growth continued to stabilize” and the company also made strides in generative artificial intelligence (AI), Andy Jassy, Amazon CEO, said Oct. 26.

“The AWS team continues to innovate and deliver at a rapid clip, particularly in generative AI, where the combination of our custom AI chips, Amazon Bedrock being the easiest and most flexible way to build and deploy generative AI applications, and our coding companion (CodeWhisperer) allowing enterprises to have the equivalent of an experienced engineer who understands all of their proprietary code is driving momentum with customers,” he said in a statement announcing the results.

Q3 AWS revenue grew 12% from a year ago, with $919 million of incremental quarter-over-quarter revenue and now has the annualized revenue run rate of $92 billion, Jassy told analysts on an earnings call after the results were announced on Oct. 26.

Although Amazon “still saw elevated cost optimization relative to a year ago” in AWS Q3 year-over-year growth, it “continued to attenuate as more companies transition to deploying net new workloads,” the company said.

“Companies have moved more slowly in an uncertain economy in 2023 to complete deals,” he  said. “But we’re seeing the pace and volume of closed deals pick up and we’re encouraged by the strong last couple of months of new deals signed.”

Meanwhile, “top of mind for most companies continues to be generative AI,” he said, adding: “As I mentioned last quarter, we think about generative AI as having three macro layers, each of which is very large in each of which we’re investing.”

It is, however, still “early days” for generative AI and “companies are still learning which models they want to use, which models they use for what purposes and which model sizes they should use to get the latency and cost characteristics they desire,” he said.

“In our opinion, the only certainty is that there will continue to be a high rate of change,” he told analysts.

Providing a few last comments on AWS’s generative AI work in his prepared remarks, Jassy said: “As you can tell, we’re focused on doing what we’ve always done for customers: Taking technology that can transform customer experiences and businesses but they can be complex and expensive and democratizing it for customers of all sizes and technical abilities. It’s also worth remembering that customers want to bring the models to their data, not the other way around. And much of that data resides in AWS as the clear market segment leader in cloud infrastructure. We’re innovating and delivering at a rapid rate and our approach is resonating with customers.”

AWS isn’t the only Amazon business working in generative AI applications, he pointed out, noting: “All of our significant businesses are working on generative AI applications to transform their customer experiences. There are too many for me to name on this call but a few examples include, in our stores business, we’re using generative AI to help people better discover products they want to more easily access the information needed to make decisions. We use generative AI models to forecast inventory we need in our various locations and to derive optimal last mile transportation routes for drivers to employ.”

Additionally, aside from “being a more intelligent version of herself, Alexa’s new conversational AI capabilities include the ability to make multiple requests at once as well as more natural and conversational requests without having to use specific phrases,” he explained. “Every one of our businesses is building generative AI applications to change what’s possible for customers and we have a lot more to come.”

The company is also “encouraged by the progress we’re making in our newer initiatives,” including :what we’re seeing in Prime Video,” which he said “continues to be an integral part of the Prime value proposition where it’s often one of the top two drivers of customers signing up for Prime. We also have increasing conviction that Prime Video can be a large and profitable business in its own right as we continue to invest in compelling exclusive content for prime members but also offer the best selection of premium streaming video content anywhere with our marketplace offering, including channels for customers who can subscribe to channels like Max, Paramount Plus, BET Plus and MGM Plus, as well as our broad transaction video-on-demand selection.”

As Amazon continues to “invest in compelling content, beginning in early 2024, Prime Video shows and movies will include limited advertisements,” he added. But he said: “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers. If customers prefer an add free option, we plan to offer that for an additional $2.99 per month for U.S. members. There is still a lot of work to be done in innovation ahead but we’re excited about our future on Prime Video.”

Total Amazon Q3 sales grew 13% to $143.1 billion, while income grew to $9.9 billion.