Dive Brief:
- Amazon expects sustained growth for AWS, its market share-leading cloud services division, as the economy contracts, the company’s SVP and CFO Brian Olsavsky said Thursday during Amazon’s FY22 Q2 earnings call, for the period ending June 30.
- In a pitch for customers to encourage cloud migrations, Olsavsky said cloud can reduce capital expenditures for data center build-outs and business operations. “When you’re trying to launch a new product or service,” he said, “cloud computing really shows its value.”
- But AWS is not ignoring expenses the customers can incur. Similar to the 2020 slowdown, AWS is prepared to help customers optimize cost and assist them in scaling down, if needed, Olsavsky said. “But we'll also, again, continue to find new customers and new industries, including government agencies.”
Dive Insight:
Amazon, which posted a net loss of $2 billion, sees potential rough patches in the economy as a growth opportunity for AWS, which had $19.7 billion in net sales in Q2, up 33% year-over-year. After expenses, its operating income reached $5.7 billion.
Net sales for Amazon increased by 7.2% reaching $121.2 billion in Q2 from the same period a year ago, but the tech giant lost money for the second straight quarter, piling $2 billion in losses on top of $3.8 billion from FY22 Q1.
Still, the company’s stock and its financial outlook remained strong, largely due to another quarter of growth and profits for AWS.
“We've seen really good progress with our customer base, longer and longer commitments, really committing to the cloud, some of that comes with credits to help them make their conversion to the cloud,” Olsavsky said.
Overall losses were due in part to a pretax loss of $3.9 billion in the second quarter from investment in Rivian Automotive, the electric vehicle company, as well as from declines in e-commerce.
Contraction in the overall economy boosted cloud business, which is expected to grow at a rate of 20% this year and next, according to Gartner’s latest analysis.
Pandemic disruptions pushed cloud migration as companies pulled back on other capital expenditures, Sid Nag, VP analyst at Gartner said.
“The COVID era actually helped cloud providers as companies move data centers into the cloud,” Nag said. “They got a taste of cloud and they never went back.”
Amazon announced plans to launch 24 more cloud availability zones across eight regions globally in the latest earnings report and sees more room for growth among current cloud customers.
“We've seen really good progress with our customer base, longer and longer commitments, really committing to the cloud,” Olsavsky said. “Some of that comes with credits to help them make their conversion to the cloud.”
