AWS sales grow to $25bn in Q1 2024

Amazon also reported AWS annual run-rate of $100bn

Amazon reported Q1 earnings and revenue yesterday featuring sales of $143.3bn and an operating income of $15.3bn

AWS sales grew 17% year-on-year, coming in at $25 billion, $9.4 billion of which was operating income. This means that 17% of Amazon's total revenue is now coming from AWS, but Amazon's cloud is contributing 65.7% of the overall group's operating income.

AWS also hit the milestone of $100 billion annual run-rate.

Amazon is the last of the big cloud three to report Q1 results. Microsoft reported year-on-year cloud revenue growth of 24% and Google Cloud grew an impressive 28%, although from a significantly smaller base. Its Q1 earnings were $9.57 billion.

Amazon's overall results, although impressive, actually fell slightly short of expectations with the average forecast being around $150 billion. Nonetheless, stock in the retail and tech behemoth still increased by up to 5% in after-hours trading.

AWS CEO Andy Jassy put the results into context:

"It's useful to remember that year-over-year percentages are only relevant relative to the total base from which you start," Jassy told investors on Amazon's earnings call. "And given our much larger infrastructure cloud computing base, at this growth rate, we see more absolute dollar growth again quarter-over-quarter in AWS than we can see elsewhere."

The obvious response to higher-than-expected earnings for the cloud giants is that interest in GenAI is driving that growth, and that the vast investments that all three have made in this area are bearing fruit. However, this is unlikely to be the full story.

"Looking across AWS, Microsoft Azure and Google Cloud, it is clear that two things are happening simultaneously – AI is contributing to growth, but also the rest of cloud spending is accelerating," said D.A. Davidson & Co analyst Gil Luria.

The period of financial retrenchment which began after the huge growth in the cloud that the pandemic brought about, appears to be at an end.

"There is an inevitable and continuous migration of workloads to the cloud and consolidation of IT spending going towards large platforms, including the hyperscalers," said RBC Capital Markets analyst Rishi Jaluria.

However, there is no doubt that AI will continue to drive cloud growth. AI services contributed 7% in growth to Azure, up from 6% points in the October-December quarter.

Microsoft CEO Satya Nadella said late last year in the company earnings call that 65% of the Fortune 500 companies were Azure OpenAI Service customers. Ai is attracting new customers to the cloud and existing customers are being upsold and spending more.

On Alphabet's earnings call last week CEO Sundar Pichai said that more than 60% of funded GenAI startups and nearly 90% of GenAI unicorns were using Google Cloud Platform.