AWS talks up 'healthy and robust' customer pipeline as revenue growth continues to slow

Amazon Web Services (AWS) has moved to assure the market that its new customer pipeline remains “healthy and robust” after its parent company reported another downbeat set of financial results.

Amazon.com reported a quarterly revenue of $149.2bn for the three months to 31 December 2022, which constitutes a year-on-year (YoY) rise of 12%, and a full-year loss of $2.7bn. By comparison, the previous financial year saw the firm make a $33.4bn profit.

Revenue was up 20% YoY for its public cloud arm, AWS, which reported revenue of $21.4bn for the quarter.

This marks another quarter of slowing growth for AWS, as the company’s performance continues to be dented by a slow-down in enterprise cloud spending.

During a conference call with analysts, transcribed by Seeking Alpha, Amazon chief financial officer Brian Olsavsky said the results reflect the fact that “enterprises of all sizes” are cutting back on their cloud spend due to “tough macroeconomic conditions”.

“Our customers are looking for ways to save money, and we spend a lot of our time trying to help them do so. This customer focus is in our DNA and informs how we think about our customer relationships and how we will partner with them for the long term,” he said.

This downturn in demand for its services is a trend, he acknowledged, that started in the middle of the third quarter of 2022, and looks set to persist into the company’s new financial year.

“So far in the first month of the year, AWS’s YoY revenue growth is in the mid-teens. That said, stepping back, our new customer pipeline remains healthy and robust, and there are many customers continuing to put plans in place to migrate to the cloud and commit to AWS over the long term,” he said.

During the call, Amazon.com CEO Andy Jassy also said the slowdown in AWS’s revenue growth is also a sign that enterprises are using cloud in the way it was always intended to be used, in terms of being able to scale up or down according to demand.

“One of the advantages…of the cloud is that when it turns out you have a lot more demand than you anticipated, you can seamlessly scale up,” he said.

“But if it turns out that you need as much demand as you had, you can give it back and stop paying for it. And that elasticity is very unusual, it’s something you can’t do on-premises, which is one of the many reasons why the cloud is and AWS are very effective for customers.”

And the fact that the company is actively helping customers curtail their spending during these times of economic uncertainty is also a show of its commitment towards building a long-lasting relationship with them, he added.

“We are not focused on trying to optimise in any one quarter or any one year – we’re trying to build a set of relationships in business that outlast us all.”