CFO on AWS slowdown: “This is always going to be a lumpy business”
Amazon’s profits tripled over the past 12 months compared to the previous year, rising to over $12 billion from $3.9 billion, its first quarter earnings showed, as the juggernaut that Jeff Bezos built showed few signs of slowing down.
Amazon Web Services (AWS) remained the biggest contributor to the company’s bottom line, contributing $7.7 billion in revenue for the Q1 period reported late yesterday; a 41 percent increase from this time a year ago.
AWS growth did slow markedly on-quarter, with revenue growth falling to single digits.
Responding to a question on that slowdown, Amazon’s CFO Brian Olsavsky told analysts on a conference call: “We’re now over $30 billion annualised run rate, 42 percent FX-neutral growth and $2 billion more of revenue this Q1 versus last Q1.”
He added: “The operating margin has also expanded in that time period by 320 basis points as a result of a lot of the good work on infrastructure and efficiencies that I talked about earlier in the call, because this is against a backdrop of a very large expansion of our tech teams and our sales teams that supports this business.”
“On AWS revenue, let me just remind you that quarterly growth last year on an FX-neutral basis, so Q1 was 48 percent, then 49 percent, then 46 percent and 46 percent. So in the first half of the year, we have a tougher comp, if you will, versus some strong growth in the first-half of last year. This is always going to be a lumpy business.”
He concluded: “It’s not only dependent on us, it’s also dependent on the companies that are adopting AWS. So there are differences in sales cycles. There are differences in adoption of the cloud. There are differences in migration patterns that will make any quarter-to-quarter movements lumpy, as I said. So we’re happy with the growth.”
New AWS Services Announced in Q1
One of the cloud giant’s biggest quarterly successes (beyond securing major contracts with Volkswagen, Ford, Lyft and others) was the reception for its new ultra-low cost storage offering Deep Glacier, general available as of March.
“In its first week of availability, Deep Archive grew three times faster than any other storage class in the 13 years since S3 launched” Amazon noted.
The solution, offered at $1 per terabyte, is intended to replace on-premises tape storage and uses a range of storage mediums to let customers store rarely used data; yet extract it and run queries on it within 12 hours, if needed.
Other new AWS services announced during the past quarter included general availability of Concurrency Scaling for Amazon Redshift, its cloud-based data warehouse offering. This is a new feature that automatically adds and removes capacity to handle unpredictable demand from thousands of concurrent users.
With more than 200 new features and enhancements in the last two years, Amazon Redshift is delivering an average of 10 times faster query times, the company said, amid burgeoning competition from rivals like Snowflake. (Sports app Strava recently dropped Redshift for Snowflake, citing better performance).
AWS also announced the general availability of Amazon EFS Infrequent Access (IA), a new storage class for Amazon EFS; the launch of Open Distro for Elasticsearch, an open source distribution of the Elasticsearch analytics engine; and the general availability of Amazon WorkLink, a fully-managed service that helps companies provider workers with secure one-click access to internal websites and web applications from their mobile devices without connecting to VPNs or using custom browsers.