Amazon (AMZN)’s cloud unit, Amazon Web Services (AWS), continues to see growth for its third consecutive quarter as customers go all in on A.I. During the April-June quarter, AWS brought in $26.3 billion in revenue, up 19 percent from a year ago, and projects it will generate $105 billion in revenue within a year. AWS’s operating profit jumped 73 percent to $9.3 billion, making up the bulk of Amazon’s earnings following its North America retail sales. During the quarter, Amazon generated $148 billion in total revenue, missing Wall Street expectations, and $13.5 billion in net income, or $1.26 a share, beating estimates.
Under AWS’s new CEO Matt Garman, that growth is driven by companies looking to “modernize their infrastructure” and “move to the cloud”—all while “leveraging new Generative A.I. opportunities” the company has to offer, according to Amazon’s President and CEO Andy Jassy. Some of AWS’s clients include Intuit, Toyota and RyanAir, a low-cost Irish airline group.
“AWS continues to be customers’ top choice as we have much broader functionality, superior security and operational performance, a larger partner ecosystem and A.I. capabilities,” Jassy said in the Q2 earnings release. The A.I. tools Jassy referred to include SageMaker for building large language models, Bedrock for businesses looking to access models from multiple providers, Q for staff looking for a coding and software development assistant, and Trainium, AWS’s custom silicon chip for machine learning.
At the same time, Amazon is spending big to keep up with the increased demand for its servers. The e-commerce giant’s quarterly spending on property and equipment, which includes data centers and GPUs, went up 54 percent from last year to $17.62 billion. AWS spent $30.5 billion in the first half of the year and expects capital investments to be higher during the second half, according to Amazon’s chief financial officer Brian Olsavsky.
“The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative A.I. and our non-generative A.I. workloads,” Olsavsky said on yesterday’s earnings call.
When asked if Amazon is at risk of over-spending, Jassy said Amazon would like to have more compute capacity than it has today.” He adds that there’s “a lot of demand right now” and that AWS will be a “very large business.” As for when AWS’s investments in A.I. will see returns, Jassy noted that generative A.I. is still in its “very early days.” He said on the call that A.I. adoption will continue to grow once customers figure out how to organize their data so it can be used for large language models. Giving customers “options” for how to run their A.I. workloads, Jassy said, will also help drive gains.
Amazon is just one of many Big Tech companies that saw growth in their cloud divisions last quarter as they placed big bets on A.I. Earlier this week, Microsoft reported a 19 percent growth in revenue across Azure and other cloud services. Google’s cloud revenue, including its servers and Workspace subscriptions, also climbed 29 percent in the latest quarter.
