A slowdown in cloud usage could have a serious impact on Amazon’s bottom line, as the company makes a large majority of its profits from cloud services. Historically, AWS has served as a key driver of Amazon’s overall growth, so seeing it slow down could dent investor confidence in the company. Additionally, other legacy businesses like bookselling could be more precarious if sales slow down at Amazon given that its main competition comes from physical stores.
Investors appear to be taking note of Amazon’s struggles with slow growth in revenue and are urging the company to take steps to fix its weakness. Efforts such as further optimization efforts may be a headwind for AWS’ growth over the next few quarters.
It was unclear whether the mid-teen growth rate dip was just a short-term hiccup, but analysts were curious as to what could be behind it. CEO Olsavsky wasn’t entirely sure himself, but he hinted that it might have something to do with the company’s longer term growth rates, which had slowed down in recent years. Whether or not this was a temporary setback or a more significant trend remained to be seen, but for now investors will surely be watching closely.
It is unknown what may happen with the AWS growth rate past this quarter as the company finds itself in uncharted territory economically. However, given that the customer base is beginning to see similar trends, it seems likely that future growth will continue at some level.
In spite of the global economic headwinds, it seems that Amazon Web Services remains a healthy business. This is evidenced by their reported annual revenue run rate of $85 billion, as well as their customer pipeline which remains robust. Furthermore, it seems that many large companies are committed to migrating to the cloud and using AWS over the long term.
AWS has long been viewed as a cost-effective way to run big data and cloud-based applications. With the growth of mobile computing, Internet of Things (IoT), and artificial intelligence (AI), it’s no surprise that customers are looking for ways to cut costs. However, Jassy believes there will be short-term deceleration in growth but that AWS still has a lot of market to conquer. He cites announcements such as Amazon Go – an ecommerce store with no checkout lines – as evidence that the company is continuing to penetrate new markets.
Currently, most of the global IT spend remains on-premises. However, with the continued growth of cloud computing, this equation is likely to flip in the next 10 to 15 years. This means that AWS will have a lot of growth ahead of it in terms of revenue and market share.
From a business point of view, the slowdown at AWS must have been worrying since it is one of the company’s main growth engines. It’s possible that there is an issue with one of the company’s key products or services, which would cause a slowdown in demand. If this is indeed the case, then it will be important for AWS to identify and fix whatever issue is causing the problem as soon as possible in order to restore normal operations.
