Amazon Web Services customers “are cutting their budgets and trying to save money in the short run”.
Brian Olsavsky, senior vice president and chief financial offiver for AWS parent company Amazon, attributed the cuts to inflation, the war in Ukraine, high energy costs and other global economic woes.
“The business is growing in absolute dollars at a really good clip,” Olsavsky said on the company’s latest quarterly earnings call, held Thursday.
“We do see some of the consumers are cutting their budgets and trying to save money in the short run,” Olsavsky said.
He continued: “I think everyone‘s just cautious and they want to, again, watch their spend."
"And as CFO, I appreciate that. And we’re doing the same thing here at Amazon.”
Olsavsky presesnted results for the third quarter of Amazon's fiscal year ended September 30.
Financial services, mortgages and cryptocurrencies were specific industries that saw lower demand during the quarter, he said.
And although less customer spending could hurt AWS in the short run, Olsavsky said he is hopeful that showing customers the flexibility that comes with cloud spending becomes a selling point for AWS in the future.
“Customers are looking to save money versus their committed spend. We have options for them to do that."
"They can manage workloads better, they can switch to lower-cost products that have different performance profiles."
"They can switch to Graviton chips that have a higher-cost-per-performance ratio”, he said.
“We think the benefit of cloud computing is really showing up right now because we allow customers to turn what can normally be a fixed expense into a variable expense, and they can let us manage the highs and lows of inflation and other costs, electricity and everything else. … I think this is just like in 2020."
"These time periods are good for long-term adoption on cloud computing."
"But, the opposite in the short run is that some companies have demand that drops.”
Unlike during the height of the COVID-19 pandemic, when some companies slowed and others performed very well, the overall cloud customer landscape is one of caution, Olsavsky said.
AWS sales reached US$20.5 billion, an increase of 28 per cent excluding foreign exchange rates.
The cloud giant reported operating income of US$5.4 billion, a 10 per cent increase year over year.
AWS parent company Amazon.com reported that net sales were US$127.1 billion for the quarter, an increase of 15 per cent year over year.
Like other publicly traded tech vendors, Amazon blamed foreign exchange rates as a hindrance, costing the company US$5 billion.
North America sales reached US$78.8 billion, a 20 per cent increase year over year.
Amazon's operating income was almost halved year over year to US$2.5 billion for the quarter.
North America sustained an operating loss of US$400 million, almost half the loss experienced during the same period a year prior.