GenAI demand helps AWS accelerate revenue growth

Amazon Web Services (AWS), the cloud computing arm of Amazon, posted a 13% growth in revenue in the fourth quarter of 2023 buoyed by demand for generative AI-related services, despite continued cost optimization activity by enterprises.  

“Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimizations slow down, we’re seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations,” Brian Olsavsky, chief financial officer of AWS, said during an earnings call, according to a transcript from The Motley Fool.

“On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus toward driving innovation and bringing new workloads to the cloud,” Olsavsky added.

For the September quarter, the company posted a growth of 12% year-on-year. The slight improvement in growth momentum marks the cloud computing division’s return to a growth trajectory.

AWS revenue growth had been declining over the past several quarters. The 12% growth in the September quarter came in as a sign of stability for AWS since it also posted 12% growth in the June quarter. The growth in the quarters before showed a constant decline, sliding from a robust 33% growth in the second quarter of 2022 to a mere 16% growth in the first quarter of 2023.

For the December quarter, AWS posted a revenue of $24.2 billion, representing 14.23% of Amazon’s total revenue for the quarter.

However, rivals Google and Microsoft have registered stronger growth during the quarter. While Google’s cloud division posted a revenue growth of 28% for the December quarter, Microsoft posted a 30% year-on-year growth in cloud revenue during the same period.

For the entire year of 2023, revenue from AWS grew by 13% year-on-year to $90.8 billion.  

The company also expects AI and generative AI-related workloads to boost its revenue in the coming quarters.

“Gen AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are a few initiatives, if any, that give us the chance to reinvent so many of our customer experiences and processes, and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years,” CEO Andy Jassy said during the earnings call.

During the last three months, Jassy said that the company had signed many deals in the field of AI, including agreements with Salesforce, BMW, NVIDIA, LG, Hyundai, Merck, MUFG, Axiata, Cathay, BYD, Accor, Amgen, and SAIC. During 2023, the company made several announcements unveiling new generative AI-based products and services, including Bedrock, Amazon Q, new large language models, and updates to infrastructure such as the Graviton and Trainium chips.