Dive Brief:
- AWS is “working with customers to lower their bills,” Amazon CFO Brian Olsavsky said Thursday during the company’s Q3 earnings call for the period ending Sept. 30. “We've seen an uptick in AWS customers focused on controlling costs, and we're proactively working to help customers cost-optimize,” he said.
- Olsavsky cited three cost-saving strategies: managing workloads better, shifting to “lower-cost products that have different performance profiles” and switching to AWS’s Graviton chips, which have a higher cost-performance ratio.
- Just as in 2020, the current period of macroeconomic uncertainty favors “long-term adoption of cloud computing,” he said, while acknowledging some differences between economic downturn and the onset of the pandemic. “Everyone is just cautious, and they want to watch their spend ... we're doing the same thing here at Amazon.”
Dive Insight:
Despite the click-click of belt tightening and the snip-snip of budget trimming, enterprise cloud spend continues to rise. It’s just not growing at the neck-breaking pace of recent years.
In part, that dynamic accounts for Amazon’s underperformance during the three-month period.
While the company saw year-over-year operating income cut nearly in half, to $2.5 billion in the third quarter, compared to $4.9 billion in Q3 2021, its cloud segment fared better — but not as well as anticipated.
AWS sales increased 28% year over year and operating income grew 10%, to $5.4 billion from $4.9 billion one year ago. That’s a marked decline from the 39% growth posted a year ago and the 33% year-over-year increase AWS achieved just last quarter.
Some companies started cutting budgets for short-term savings in Q3, according to Olsavsky.
“Although we had a 28% growth rate for the quarter for AWS, at the back end of the quarter we were more in the mid-20% growth rate,” he said.
Cloud allows for such short-term fluctuations in usage and expense. That’s one of its advantages in times of economic uncertainty.
“The benefit of cloud computing is really showing up right now because we allow customers to turn what can normally be a fixed expense into a variable expense, and they can let us manage the highs and lows of inflation,” Olsavsky said.
Companies wrestling with budgetary constraints can also look to renegotiate vendor contracts.
The continuing impacts of inflation, a strong dollar and higher energy costs are three additional factors Olsavsky cited as reasons for Amazon’s slowed quarterly growth.
