- Amazon’s cloud business is seeing a slowdown in growth as customers reduce spending.
- Amazon’s execs say AWS growth will decline even further this quarter.
- Customers are optimizing spending as they look to reduce costs amid the economic downturn.
The growth of Amazon’s cloud business was shaved in half as companies confronting an economic slowdown look to cut costs.
In other words, a bank that has fewer deals to make needs less computing power; same with an advertising agency that has fewer ads to place. All of that translates into less spend at Amazon Web Services, or AWS — Amazon’s cash cow that brought in revenues of $21.4 billion last quarter.
AWS still logged 20% growth compared to the same period a year ago, but that’s down sharply from the same quarter in 2021, when AWS logged 40% growth.
The decelerating numbers come as Amazon as a whole reported its slowest year of growth in the time it’s been a public company.
Meanwhile, AWS’s growth is expected to continue to slow even further in the quarters ahead, Amazon CFO Brian T. Olsavsky said on a call with Wall Street analysts. He said trying economic times would continue to be a “headwind,” saying AWS’s growth could notch down even further into the mid-teens.
It’s not entirely surprising. Analysts were expecting a slowdown in growth after Microsoft also reported slowing cloud growth last week. Analysts lowered their expectations after that, but AWS numbers missed even those dimmed expectations.
As corporate customers look to save money in an economic downturn, they want to cut their cloud costs, CEO Andy Jassy said. There’s various things customers are doing when cutting spending, including switching to lower-cost products, running calculations less frequently, or looking at different options for data storage.
Still, Olsavsky said the slowdown wasn’t cause for alarm. “We do have new deals,” he said, pointing to new customers in the pipeline. “And whether there’s short-term belt tightening in the infrastructure expense by a lot of companies, I think the long-term trends are still there. And I think the quickest way to save money is to get to the cloud.”
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