Amazon’s 16% cloud revenue growth impresses even as margin narrows

Amazon Web Services CEO Adam Selipsky speaks at the CERAWeek by S&P Global conference in Houston on March 7, 2023.

F. Carter Smith | Bloomberg | Getty Images

Amazon said Thursday that its cloud unit grew revenue by about 16% in the first quarter, a slightly more rapid pace than analysts had projected.

Revenue from Amazon Web Services totaled $21.35 billion, representing almost 17% of Amazon’s overall revenue, according to the company’s earnings statement. Analysts surveyed by StreetAccount had expected $21.22 billion in AWS revenue. In the fourth quarter, AWS revenue grew 20%.

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“AWS sales and support teams continue to spend much of their time helping customers optimize AWS spend so they can weather this uncertain economy,” Brian Olsavsky, Amazon’s finance chief, said on a conference call with analysts.

Amazon faces competition from Alibaba, Alphabet, Microsoft, and Oracle but enjoys a comfortable lead in the cloud infrastructure market globally. Microsoft executives said earlier this week that during the quarter its cloud customers took steps to improve the efficiency of their cloud spending.

On Tuesday, Alphabet said its Google cloud segment made money for the first time on record, turning a $191 operating profit.

Amazon said AWS operating income came out to $5.12 billion, a bit under the StreetAccount consensus of $5.18 billion. AWS has generated profit for its parent company since 2014. Amazon as a whole had $4.77 billion in operating profit.

The operating margin for AWS, at 24%, was the narrowest it’s been since 2017. On Wednesday, Adam Selipsky, Amazon’s AWS CEO, issued a memo saying the company had started informing employees who will be laid off from the division.

“Both the size of our business and the size of our team have grown significantly over recent years, driven by customer demand for the cloud and for the unique value AWS provides,” Selipsky wrote.

“This growth has come quickly as we’ve moved as fast as we could to build what customers have needed. Given this rapid growth, as well as the overall business and macroeconomic climate, it is critical that we focus on identifying and putting our resources behind our top priorities — those things that matter most to customers and that will move the needle for our business.”

During the quarter AWS said it would open a region of data centers in Malaysia.

AWS revenue growth rates in April have been 500 basis points lower than in the first quarter, Olsavsky said on the conference call.

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