AWS's Q3 Earnings Call: The Ripple Effects of the Big Tech Contraction
William Becker

William Becker

November 8, 2022 · 2 min read

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Financial Overview

Amazon.com released its Q3 earnings on October 27th. The company’s Cloud Service Provider’s (CSP), AWS, Year-Over-Year (Y/Y) growth slowed to 27.5% missing analysts’ estimates - down from 38.8% last year. It is AWS’s slowest growth to date since they started reporting financials in 2014. Q3 Net Sales came in at $20.5 billion, missing The Zacks Consensus Estimate of $20.8 billion. AWS’s Net Sales grew 32.2% year to date, totaling in at $58.7 billion. 


AWS’s Q3 net operating income is $5.4 billion up from $4.9 billion in 2021, a 10.6% (Y/Y) growth rate, missing the StreetAccount estimate of $6.37 billion. Additionally, AWS’s year-to-date (YTD) operating income is $17.6 billion up from $13.2 billion, a 33.2% growth rate. Showing positive growth in the cloud division’s profitability.

AWS's Pivot

In an effort to augment its cloud service, AWS has added 200 new products and services to help reduce costs, innovate, and increase agility. Including the availability of the new AWS EC2 machine learning training instances (Trn1), which helps build more accurate machine learning models and reduce training times. AWS customers save 50% on their deep learning training costs using Trn1s. 


AWS’s growth has slowed, which is a negative for the company. They also recently announced hiring freezes for the company, a first-ever for the CSP that controls 39% of the cloud infrastructure market as of 2021. 


In lieu of redirection, Amazon’s cloud division recently announced that they are focusing on cost reduction for customers - the company has a wide variety of cost-optimization products including Reserved Instances for EC2 workloads. 


Moreover, during the earnings call itself, AWS’s CFO Brian Olsavsky announced the migration to Graviton chips - a high cost-performance ratio that has helped EC2 customers get up to 40 percent price performance benefit in as little as 4 days according to AWS’s website.

Conclusion

In short, earnings slightly missed for AWS’s Q3 on a few key metrics; however, the CSP is pivoting with new products such as Trn1 machine learning EC2 instances and Graviton chips that will maintain the cloud provider’s market share. 


The Author

William BeckerCustomer Success Manager
William Becker
Customer Success Manager

FinOps analyst

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