AWS keeps pace with Microsoft, Google in cloud sector war of attrition

AWS has confidently proved it’s able to keep pace with cloud competitors Google and Microsoft at a recent earnings call, showing an impressive rate of growth on the back of its infrastructure and AI offerings. 

Segment sales for the cloud arm of the tech giant increased 17% year-over-year to just over $25 billion, rocketing past analyst expectations.

AWS’ main competitors, Google and Microsoft, both delivered similarly strong results in their own earnings calls, with Google Cloud clocking a 28% boost in revenue and Microsoft’s Azure showing a 29% surge - both of which were buoyed by enterprise interest in generative AI.

With strong results from Google and Microsoft, all eyes naturally turned to AWS to see if the long-time industry leader was keeping pace. According to Forrester analyst Lee Sustar, the hyperscaler has very much outpaced expectations. 

“Microsoft and Google's strong AI-driven cloud earnings put a spotlight on the AWS earnings call as investors - and customers - looked for evidence that AWS could tap the surge of AI spending as well,” Sustar said. “The answer is yes.”

Amazon CEO Andy Jassy specifically highlighted AWS’ strong performance in the earnings call, highlighting the strong industry appeal of the hyperscaler’s cloud and AI offerings. 

“The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate,” Jassy said. 

Jassy also mentioned that AWS was predicting a “$100 billion annual revenue run rate”,  with the suggestion being that the hyperscaler is on track to keep generating significant revenue growth over the next year.

This trend does look already to be in place, as AWS showed a significant mark-up in revenue for 2024 as compared with last year, which delivered slightly over $21 billion in net sales at the start of 2023. 

AWS, which constitutes just over 17% of Amazon’s overall $143 billion revenue stream, looks on track to achieve its targets and maintain its position in the top spot in cloud computing.

AWS operating revenue surges  

As Sustar noted, what is perhaps most interesting about the recent earnings call is AWS' demonstration of an increase in operating income and the concurrent implication that AWS' AI investment is profitable. 

The cloud firm’s operating income doubled to just over $9.4 billion in Q1 of 2024; this marks a significant increase compared to the same period in 2023, in which operating income stood at $5.1 billion. 

This, again pipped analyst expectations, who predicted that AWS’ operating income would close the first quarter of 2024 at $7.52 billion. 

“More noteworthy was a near doubling of AWS operating revenue in the quarter to $9.4 billion, up from $5.1 billion a year earlier,” Sustar said.

"The operating income boost indicates that AWS has managed to invest to stay in the AI game without dragging down the operating income that helps drive Amazon overall,” he added. 

AWS knows what customers want

Like Google Cloud, AWS was forced to play catch up to Microsoft in the generative AI space in early 2023. However, over the course of the year the hyperscaler gained significant momentum, unveiling a host of generative AI-powered tools and services for enterprise users. 

Chief among these is Amazon Bedrock, the company’s large language model (LLM) framework which offers users access to a range of in-house and third party models from firms such as Anthropic and Meta.

The launch of Amazon Bedrock was by all accounts a roaring success, and the framework has since become a core component of its generative AI offering.

Speaking in July last year, Swami Sivasubramanian, VP for database, analytics, and machine learning at the cloud giant revealed the service had attracted “thousands of customers” within a matter of months. 

Shoring up these offerings at AWS Summit London last month, the company once again reiterated the value of its Amazon Bedrock platform.