AWS Warns Of Slowing Demand As Customers Seek To Cut Spend • The Register

Amazon has teamed up with other major tech players in offering a grim view of its financial future, earning it a massive share price drop, and even its booming cloud business is not immune.

The e-tail giant reported Q3 2022 revenue today of $ 127.1 billion, up 15% year-on-year. Net profit of $ 2.9 billion was $ 300 million lower than last year, but a return to profit after two quarters of red ink.

The guidance for the fourth quarter was for revenue growth in the two to eight percent range, which investors saw as a sign that the holiday shopping season is going to be stinking. Amazon’s stock price then turned a plummet: After opening at $ 115.66, the company’s scrip dropped to $ 88.10 before closing the day at $ 94.94.

AWS energy bills are “substantially higher … more than double in the past two years”

Amazon Web Services brought in $ 20.54 billion in the quarter, up from $ 16.1 billion earned in the third quarter of 2021. The cloud giant’s annual revenue rate is now over $ 82 billion, placing AWS closely with Sony in terms of technology with the highest earnings companies.

But CFO and senior veep Brian Olsavsksy revealed that AWS also saw signs of slowing.

“Although we had a 28% growth rate for the quarter for AWS, the back end of the quarter, we were more in the middle of the 20% growth rate,” he said. “So we took that forecast to the fourth quarter.”

“With continued macroeconomic uncertainties, we have seen an increase in AWS customers focused on cost control,” he added.

“Customers are trying to save money versus committed spending,” he added, sometimes to curb cloud fleets that expanded during the early months of the COVID-19 pandemic. “We have options for doing that. They can handle workloads better. They can move to low-cost products with different performance profiles. They can move to Graviton chips that have higher cost / performance ratios.”

Graviton is AWS’s Arm homebrew based server silicon. If AWS moved more customers to those chips, it would be good news for the company, its customers, and the Arm ecosystem. But that’s no good at all for the likes of AMD and Intel – the latter has already reported a bad drop in server CPU revenue for its x86 offerings.

Olsavsksy also said AWS is struggling with energy bills “which are materially higher … more than double in the past two years”.

“So we’re also fighting through this, which is new to the AWS business,” he added.

Asked for the company’s earnings, executives expressed optimism that, whatever the prevailing economic conditions, Amazon is ready to handle the spikes in purchases resulting from the fourth quarter. Inventory levels are pleasantly high, delivery times are low, and the company has optimized its business to effectively utilize its transport fleets and reduce long-distance shipments both within each market and when moving stock. worldwide.

Other cost control measures are in place as well, but the company believes they have isolated them from the customer experience and is as well placed as anyone else to enjoy a nice Thanksgiving and Christmas time.

May this optimism also apply to the rest of us. ®