Amazon's Biggest Revenue Driver AWS Falls Prey To Macro Slowdown

  • Amazon Web Services has been Amazon.Com, Inc's AMZN most significant growth engine over the past decade, taking business from some of the most prominent tech vendors worldwide.
  • As fear of recession looms, companies are scrambling to reduce costs and be lean. Cloud computing expenses are one area where corporates are tightening budgets, CNBC reports.
  • As the Fed continued to lift interest rates to address rising prices, it has led to economic deterioration by consumers and businesses.
  • Amazon is aware of the macro challenges, and hence AWS employees are reaching out to clients to see how it can help optimize spending, said David Brown, AWS' vice president.
  • "If you're looking to tighten your belt, the cloud is the place to do it," AWS CEO Adam Selipsky said during his keynote presentation.
  • However, an investment firm Andreessen Horowitz analysis last year, painted a different picture. It showed that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.
  • Amazon is also offering a cheaper alternative, Graviton computing instances based on energy-efficient Arm-based chips alternative to standard Advanced Micro Devices, Inc AMD and Intel Corp INTC processors.
  • "We do see some customers who are doing some belt-tightening now," Selipsky told CNBC. Expedia Group, Inc EXPE CEO Peter Kern sees the cloud as an area where his company can reduce its fixed costs.
  • The National Football League (NFL), which used AWS to produce statistics and schedules, has also made conservative plans around costs. NFL is renegotiating the terms of the multi-year cloud agreement with AWS.
  • In Q3, AWS recorded a growth of 27.5%, outpacing Amazon's increase of 15%. AWS generated $5.4 billion in operating income, accounting for more than 100% of the profit of its parent company.
  • Price Action: AMZN shares closed lower by 1.43% at $94.13 on Friday.
  • Photo by Tony Webster via Flickr
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