Cloud is the word with big tech’s third-quarter earnings. To wit, Amazon Web Service (AWS) sales grew 12% from the year-ago quarter, reeling in $23.1 billion. But that was less than Wall Street’s projection of $23.2 billion.
Why the shortfall? As big businesses are get more careful with spending, the top cloud service providers have been impacted, except for Microsoft’s Azure, which appears to have gained ground on its rivals.
Amazon CFO Brian Olsavsky assured investors on the company’s earnings call today that “cost optimization”—i.e. the spending cutback—is slowing.
“There are still companies that are joining that effort but it’s slowing down, and we’re starting to see more and more new workloads come up,” he said.
Still, Amazon’s dominance in the cloud space is wavering as rivals Microsoft and Alphabet each claim more market share. Earlier this week, Alphabet’s Google Cloud reported 22%revenue growth in the recent quarter compared to the year before, even though that came in short on estimates. Microsoft Azure sales grew 29% compared to last year’s third quarter.
Amazon launched its Bedrock service during the recent quarter, for customers to build and run generative artificial intelligence (Gen AI) models that can compose text from a few words of user input, and that is “driving momentum with customers,” Amazon CEO Andy Jassy said in the earnings announcement.
Jassy cited Adidas, Booking.com, GoDaddy, LexisNexis, Merck, Royal Philips, and United Airlines as its customers running Gen AI models on the Bedrock platform.
Earnings still beat forecasts
Despite gray clouds over the cloud sector, Amazon’s third-quarter earnings blew through estimates. Profit came to 94 cents per share, soaring above the expected 58 cents. Revenue hit $143.1 billion, compared to the estimated $141.4 billion.
Digital advertising put a shine on the balance sheet with sales of $12.1 billion compared to expected $11.6 billion. Meanwhile, Amazon’s July two-day Prime sales bonanza broke records and topped an estimated $13 billion, according to data analytics firm Numerator.