Amazon’s best money-making machine is slowing down

Slowing down.
Slowing down.
Image: Reuters/Shannon Stapleton
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The trend can’t be ignored any longer. Amazon Web Services, the cloud-computing business that last year churned out more than $12 billion in revenue for Amazon, is slowing down.

Amazon said April 27 that AWS contributed $3.7 billion in revenue in the latest quarter, a 43% increase from the same period the previous year. That marks the seventh consecutive quarter that year-over-year growth in AWS has slowed.

(Overall, Amazon beat expectations in the first quarter, with sales up 23% year-over-year to $35.7 billion and net income that rose 41% from the previous year to $724 million. The stock is up 3.7% in after-hours trading.)

On some level, the slowdown is to be expected. AWS was a smaller business two years ago making off-the-charts growth rates easier to attain. The 81.5% growth that AWS reported in the second quarter of 2015, and the 78% growth it reported in the one after that, were hardly bound to last. And most companies would kill for a multibillion-dollar business growing at a 40% clip.

But cloud-computing is thought to be a commodity business, meaning customers will go to the service that offers the most for the lowest price. Amazon’s competitors in infrastructure cloud services include Microsoft, IBM, Google, and Salesforce. Amazon has a handy lead, but that doesn’t mean it will stay ahead. Microsoft Azure is growing more quickly than AWS, up 93% year-over-year for each of the last two quarters. Google believes its prowess in artificial intelligence gives it a competitive advantage.