Amazon Web Services is on track to earn $100 billion of revenue in FY2024, has improved its margins, and provides the bulk of its parent company's operating income.

News of the cloudy concern's performance arrived on Tuesday with Amazon.com's Q1 results, which featured sales of $143.3 billion - up 13 percent year on year - $10.4 billion of net income and operating income of $15.3 billion.

AWS sales improved 17 percent year-on-year to land at $25 billion, $9.4 billion of which was operating income - a profit metric that omits some of the costs used to calculate net income. Do the math, people: 17 percent of Amazon revenue comes from AWS, but the cloudy concern produces 65.7 percent of the overall group's operating income.

Improved AWS margins helped: the unit improved by 800 basis points, or eight percent.

CEO Andy Jassy felt the need to explain AWS's growth rate - perhaps because Microsoft and Google recently reported cloudy growth of 31 percent and 28 percent respectively.

"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."

Which is nice, Andy. But if your rivals grow faster than you their base numbers are also growing. Just saying.

Jassy of course sees better days ahead for AWS, for two reasons.

One is that generative AI is a new class of workload that he believes will largely be run in the cloud. AWS is doing what it takes to be a player, with Amazon capex - which came in at $48.3 billion for FY2023 - predicted "to meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure capex to support growth in AWS, including generative AI." Another way the biz will cash in on generative AI is by launching its own services powered by the tech - and, as if on cue, Tuesday also saw the general availability of the Amazon Q chatbot that was announced last year.

The other reason Jassy thinks AWS will keep growing is that the post-pandemic era of customers focusing their efforts on cloud cost optimization has just about ended.

"Companies have largely completed the lion's share of their cost optimization and turned their attention to newer initiatives," Jassy explained. "Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premises infrastructure to the cloud to save money, innovated at a more rapid rate, and to drive more developer productivity. The pandemic and uncertain economy that followed distracted from that momentum, but it's picking up again."

The CEO also noted that 85 percent of current IT spend is for on-prem tech. So AWS has plenty of room for growth even as it approaches $100 billion annual revenue.

For perspective, Dell's full year revenue for FY24 was $88.4 billion - down from $102.3 billion the year before. Even at 17 percent growth, AWS is doing far better. Among enterprise players, only Microsoft makes more revenue, while among tech companies Google and Apple lie even further ahead.

Amazon predicted Q2 sales of between $144.0 billion and $149.0 billion - growth of seven to eleven percent year on year.

Investors were a little disappointed by that guidance, and Amazon's share price followed the NASDAQ as the index eased a couple of points across the day - then dropped around another point after the bell.

One more thing: AWS's huge operating income number was attributed, in part, to its decision to run servers for six years. Amazon CFO Brian Olsavsky told investors that decision "primarily benefits the AWS segment" - perhaps a sign that the cloudy business unit runs more tin than Amazon itself? ®

https://www.theregister.com//2024/05/01/amazon_q1_2024/