AWS riding sky high as cloud earnings drive broader organizational profits

Amazon has recorded impressive quarterly growth off the back of a strong performance at the tech giant’s cloud division, AWS. 

The cloud unit recorded $22.1 billion in sales across the most recent quarter, marking a 12% increase and exceeding analyst expectations. 

While this marks a decrease on the prior quarter - in which it recorded a 15% sales growth rate - the recent earnings call underlines the integral role that the division plays within the broader organization. 

Amazon recorded $7.7 billion in operating profits in Q2, of which AWS accounted for $5.4 billion, roughly 70%. 

In a statement coinciding with the results, CEO Andy Jassy highlighted AWS’ performance as a key growth driver for the tech giant, despite ongoing economic uncertainty and decreasing client spending on cloud computing. 

“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment,” he said. 

Strong performance from AWS

Jassy pointed specifically to recent generative AI moves at AWS as a key talking point in his earnings call statement, underlining the impact that Bedrock has had on the division in recent months.  

“AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models (Trainium and Inferentia chips), customize large language models to build generative AI applications and agents (Bedrock), and write code much more efficiently with CodeWhisperer,” he said. 

Since its launch in April this year, Amazon Bedrock has been a huge source of excitement both at the firm and within the broader technology industry. 

Last month, Swami Sivasubramanian, VP for database, analytics, and machine learning at the cloud giant, told Reuters that the company has drawn “thousands of customers” since its launch. 

A host of major organizations, including Sony, Lonely Planet, and Ryanair are already using Bedrock to build generative AI applications. 

This week’s earnings call also shed more light on the organizations flocking to Bedrock, with the company naming Royal Philips, Old Mutual, and HSBC among its newest customers.

Bedrock marked AWS’ first significant foray into the generative AI ‘race’ in an attempt to face off against Microsoft and Google. 

The influx of new customers to the service suggests that the approach is working and is enabling the company to differentiate itself from competitors in the space by leveraging its established partner ecosystem to provide both proprietary and third-party LLMs. 

AWS has also been aggressively expanding its geographic footprint in recent months with the announcement of several new cloud regions globally. 

In May, the firm unveiled an ambitious $13 billion investment package to expand its presence in India. The move builds on a previous investment of around $3.7 billion and looks to capitalize on growth in India and South Asia. 

Two months prior, the cloud giant committed an additional $6 billion to expand its Malaysian operations in another bullish move in the region. 

Just this week, AWS said it plans to invest over $7 billion in building its footprint in Israel to create a new cloud region and support digital transformation in the government and public sector. 

Phil Dawson, VP for research at Gartner, told ITPro that this latest move forms part of the company’s “natural evolution” as it continues to build its geographic sprawl and face off against competitors such as Microsoft in Europe and the Near East. 

“I think there’s a couple of things at play here with AWS,” he said. “There’s that expansion and local investment that we’ve seen happening a lot, especially in Europe and Arab countries as well. 

“A lot of capacity has been built in metropolitan areas where it’s needed. I think there's a natural geographic expansion going on at the moment.”

Dawson said that, traditionally, AWS has been “a little bit behind” Microsoft in its positioning in Europe due to the fact that Microsoft has focused specifically on cultivating a “broad European presence”. 

“I think AWS investing here has broadened some of their in-country capabilities, which is a good step forward.”

Bucking industry gloom

AWS’ strong performance this year has come against a troubling economic backdrop that has witnessed significant consumer hesitancy in the global cloud market. 

The beginning of 2023 was plagued with claims of a looming ‘cloud slowdown’ that some analysts predicted would create serious problems for major providers such as AWS, Google, and Microsoft. 

However, while current earnings pale in comparison to highs witnessed in 2021, the firm is still consistently bucking economic trends and appears committed to investing its way through current economic hardships as part of a long-term strategy to invest and reap future rewards.