Amazon Web Services (AWS) has seen a rebound in its year-over-year revenue growth rate, which the firm is attributing to enterprises completing their post-pandemic cloud cost optimisation efforts.
The company’s first quarter results, which cover the three months to 31 March 2024, saw the public cloud giant report a 17% year-on-year uptick in revenue to $25bn, as well as a $9.4bn profit. In comparison, the firm’s revenue and profit for the same quarter in 2023 was $21.4bn and $5.1bn, respectively.
AWS’s financial results have taken a hit in previous quarters because of enterprises focusing more on streamlining their existing cloud investments than investing in new projects and initiatives.
However, in the wake of the company posting its Q1 results, Amazon CEO Andy Jassy claimed the “lion’s share of cost optimisation” is “largely completed”, and now enterprises are turning their attention once more to accelerating the pace of their cloud migrations.
“Before the pandemic, companies were marching to modernise their infrastructure, moving from on-premise infrastructure to the cloud to save money, innovate at a more rapid rate, and to drive more developer productivity,” said Jassy, in remarks transcribed by financial blogging site Seeking Alpha.
“The pandemic and uncertain economy that followed distracted from that momentum, but it’s picking up again. Companies are pursuing this relatively low-hanging fruit in modernising their infrastructure. And with the broadest functionality by a fair bit, deepest partner ecosystem and strong security and operational performance, AWS continues to be their strong partner of choice.”
He also used the conference call to talk up the acceleration in adoption the company is seeing with regard to the take-up of its three-strong stack of generative artificial intelligence (GenAI) offerings.
The first layer of this stack is aimed at companies that want to build their own large language models (LLMs) from scratch, while the second is aimed at firms that want to make use of existing LLMs, using services such as Amazon Bedrock.
The third layer is for companies and developers that want to take a more hands-off approach to building GenAI applications, with the help of the Amazon Q, the company’s GenAI-powered software development tool that went on general release on 30 April.
“We remain very bullish on AWS,” said Jassy. “We’re at $100bn-plus annualised revenue run rate, yet 85% or more of the global IT spend remains on-premise. And this is before you even calculate GenAI, most of which will be created over the next 10 to 20 years from scratch and on the cloud. There is a very large opportunity in front of us.”
Lee Sustar, principal analyst at IT market watcher Forrester, said Amazon’s results show the company is tapping into the same surge in enterprise AI spending that its main competitors, Google and Microsoft, are benefiting from.
“Microsoft and Google’s strong AI-driven cloud earnings put a spotlight on the AWS earnings call as investors – and customers – looked for evidence that AWS could tap the surge of AI spending as well,” he said. “The answer is yes.”
“AWS clocked revenue of $25bn, a 17% increase over the same period a year earlier. But more noteworthy was a near-doubling of AWS operating revenue in the quarter to $9.4bn, up from $5.1bn a year earlier.
“The operating income boost indicates that AWS has managed to invest to stay in the AI game without dragging down the operating income that helps drive Amazon overall,” said Sustar.