- Despite an impressive second-quarter earnings report, Amazon’s cloud business missed analyst expectations and reported slowing revenue growth.
- Amazon Chief Financial Officer Brian Olsavsky explained the deceleration in the company’s earnings call by revealing that Amazon Web Services has been actively looking for ways to help customers scale down usage to save money during the pandemic.
- The move helps both parties, he reasoned: It helps clients stay afloat while also benefiting the “longterm health of our relationship with them.”
- Are you an Amazon Web Services employee? Contact this reporter via encrypted messaging app Signal (+1-425-344-8242) or email ([email protected]).
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Amazon blew away expectations in the company’s second-quarter earnings report on Thursday, except for its Amazon Web Services cloud business.
The business brought in $10.81 billion in Q2, falling slightly short of Wall Street’s $11.01 billion expectations. Meanwhile, revenue growth for the segment slowed to just 29% year-over-year, down from 33% last quarter.
But, according to Amazon, the deceleration was a result of its own helpfulness. In response to a question about slowing revenue on the company’s earnings call, Amazon Chief Financial Officer Brian Olsavsky said that the cloud business has been actively looking for ways to help customers scale down usage so that they can save money during the pandemic.
“What we see are companies working really hard right now to cut expenses, especially in the more challenged businesses like hospitality and travel, but pretty much across the board,” Olsavsky said. “We’re actively — with our sales force — looking at ways we can help them save money.”
The company believes that in the long run this will help Amazon, because it will allow its customers to continue operating, thus remaining AWS clients into the future.
Helping customers scale back is “not going to help our usage growth in the short run, but it’ll help those customers save money,” Olsavsky said. “We think that’s the right thing to do not only for their success — so they can come out of this in better shape — but also for the longterm health of our relationship with them.”
Olsavsky’s comments seem to counter earlier reports that Amazon Web Services was unwilling to work with customers to cut their cloud costs amid the pandemic.
While some customers are looking at ways to reduce cloud spending, Olsavsky said, “it’s a bifurcated world,” and Amazon is seeing some customers accelerate their shifts to the cloud.
AWS revenue growth slowed to 29% year over year this quarter, down from 33% last quarter, 34% in Q4 2019, 35% in Q3 2019, 37% in Q2 2019, and 42% in Q1 2019.
Meanwhile, AWS operating profit jumped to 54%, up from 36% in the previous quarter, and 18% in the quarter before that. Olsavsky explained Amazon profit was up across the company because of cuts to marketing, travel, and medical expenses amid the coronavirus crisis.
Are you an Amazon Web Services employee? Contact this reporter via email at [email protected], message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242.