Dive Brief:
- To absorb growing customer demand for AI compute, Amazon will increase capital investments in its data centers, CFO Brian Olsavsky said during a Thursday earnings call.
- The largest hyperscaler grew cloud revenue by 13% year over year in Q4 2023 and during the full fiscal year, the company said. AWS segment sales were $24.2 billion during the three-month period ending Dec. 31 and $90.8 billion on the year.
- To help offset infrastructure spending, the company extended the useful life of its cloud servers by one year, a move that will save nearly $1 billion this quarter, Olsavsky said. AWS will keep the hardware in service for six years beginning in January 2024.
Dive Insight:
AWS focused on helping customers optimize cloud spend last year to mitigate the impact of a slowing economy. Cloud revenue growth, which grew 29% year over year in 2022, experienced a corresponding drop.
A more favorable macro outlook coupled with generative AI enthusiasm has rekindled enterprise modernization aspirations, according to Olsavsky.
“We continue to see the diminishing impact of cost optimizations,” Olsavsky said. “As these optimizations slow down, we’re seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations.”
The company grew its data center footprint in December, opening a cloud facility in Western Canada and announcing plans to add 12 availability zones and four more cloud regions.
Building capacity for AI workloads into existing infrastructure is also a priority, according to Olsavsky.
“We do expect CapEx to rise as we add capacity in AWS for region expansions, but primarily [due to] the work we’re doing with generative AI projects,” Olsavsky said.
The technology isn’t yet a major revenue driver, but the company anticipates generative AI to intensify cloud consumption.
“If you look at the GenAI revenue we have, in absolute numbers, it's a pretty big number,” Amazon President and CEO Andy Jassy said Thursday. “But in the scheme of a $100 billion annual revenue run rate business, it's still relatively small, much smaller than what it will be in the future, where we really believe we're going to drive tens of billions of dollars of revenue over the next several years.”
