Dive Brief:
- AWS sales grew 12% year-over-year in the second quarter of 2023, reaching $22.1 billion, for the period ending June 30, the company said Thursday. By comparison, the unit's net sales grew 33% in the second quarter last year, earning $19.7 billion.
- While AWS is the clear market share leader among hyperscalers, it has seen its growth rates slip as it has scaled. Q1 net sales increased just 16% year-over-year. However, the company said it is beginning to see the unit stabilize.
- While Amazon's North America segment rebounded from Q2 operating incomes losses last year — and the international segment continues to operate at a loss — AWS is still responsible for the bulk of Amazon's profit. But its operating income dropped 6% year over year, with AWS reporting $5.4 billion in Q2 operating income, down from $5.7 billion in 2022.
Dive Insight:
AWS began to feel the pinch of difficult economic conditions as customers looked for ways to cut costs — including the cloud bill.
Optimization trends are beginning to ease, according to Amazon SVP and CFO Brian Olsavsky.
"What we're seeing in the quarter is that those cost optimizations, while still going on, are moderating and many may be behind us in some of our large customers," said Olsavsky, speaking Thursday during the earnings call. "Now we're seeing more progression into new workloads, new business."
Cost optimization has been the overriding trend in 2023, as cloud and SaaS providers have encountered closer customer scrutiny over IT spending. Still, from a revenue perspective, AWS has positive signs it can point to, according to John Dinsdale, chief analyst and research director at Synergy Research Group.
"It has grown its quarterly revenues by $2.4 billion since Q2 last year, with around $800 million of that growth achieved in the quarter it just reported on," Dinsdale said in an email. "These are big numbers that are being added to an already massive base of business."
Despite the macroeconomic headwinds and competition from rival providers Microsoft and Google, Amazon has not relinquished its position atop the hyperscaler sector. The firm continued to hold one-third of the market share, according to Synergy Research Group numbers.
"From a purely math perspective, it is harder for AWS to generate the same growth percentages as Microsoft and Google, as AWS is so much bigger," said Dinsdale.
