Amazon Web Services Growth Trends

Amazon announced their earnings yesterday. Like Microsoft & Google, Amazon’s Web Service business is seeing a surge of growth, up from 13% annual to 17% annual growth (16% when excluding the leap year). Aside from the overall growth of these clouds increasing, the massive investment in CapEx data centers, power plants, and GPUs is stunning. These are not one-time investments, but part of a broader trend that started to occur after the introduction of GPT 3 in mid-2020 Amazon was the first to invest significantly. Google and Microsoft would wait another two years to replicate a similar level of investment. Each of these businesses are large enough to justify it. Here are some highlights from Amazon’s earnings : “We see considerable momentum on the AI front where we’ve accumulated a multibillion-dollar revenue run rate already.” Over time, we should expect Amazon and Google, amongst others, to start to compete with Nvidia GPUs, offering their own which should meaningfully improve margins. “We have the broadest selection of NVIDIA compute instances around, but demand for our custom silicon, Trainium and Inferentia, is quite high given its favorable price performance benefits relative to available alternatives. Larger quantities of our latest generation Trainium2 is coming in the second half of 2024 and early 2025.” And those margins are increasing for the clouds, which should catalyze more companies, especially the largest spenders, to think about managing their own infrastructure. 8 percentage points increased margins in a quarter is titanic. “AWS margins increased 8 basis points sequentially off Q4” If we needed any reminder, Amazon Web Services is now a $100 billion runway business, growing 17% a year, or adding $150b in market cap per year at a 9x multiple. “Moving to AWS. Revenue was $25 billion, an increase of 17% year-over-year, and AWS is now a $100 billion annualized revenue run rate business. "

AWS on AI: “As Fast as We Add Capacity, It’s Being Consumed” Amazon plans to continue to invest heavily in infrastructure for its AI and cloud businesses, CEO Andy Jassy said in the company’s Q1 earnings call Thursday. ”Our AI business right now is a multi-billion dollar annual run rate business,” said Jassy. “It’s growing triple digit percentages year over year. And as fast as we actually put the capacity in, it’s being consumed.” Jassy said AI infrastructure represents a long-term investment in business transformation for Amazon Web Services (AWS) and its customers. “If you believe your mission is to make customers’ lives easier and better every day, and you believe that every customer experience will be reinvented with AI, you’re gonna invest very aggressively in AI,” said Jassy. “And that’s what we’re doing. Before this generation of AI, we thought AWS had the chance to ultimately be a multi-hundred billion dollar revenue run rate business. We now think it could be even larger.” Jassy also said that AI should be seen as part of the larger story of cloud computing’s disruption of enterprise IT. “For companies to realize the full potential of AI, they’re going to need their infrastructure and data in the cloud,” he said. “It’s useful to remember that more than 85% of the global IT spend is still on premises, so not in the cloud yet. It seems pretty straightforward to me that this equation will flip in the next 10 to 20 years.”

I listened to the 2nd half and the Q&A section of Amazon's Q3 2024 earnings call. It's fascinating how generative AI is fueling AWS margins. However, Amazon needs to keep CapEx in check to avoid future problems. Q3 2024 earnings reveal the company’s continued strong growth in key areas, notably AWS and digital advertising. ++ My Key Highlights ++ 📍Amazon Web Services (AWS) achieved revenue of $27.5 billion, marking a 19.1% year-over-year growth. This robust increase highlights the ongoing demand for cloud solutions and the need for AI. With an annualized run rate of $110 billion, AWS maintains its position as a dominant player in the cloud market. 📍AWS reported a significant operating income of $10.4 billion, increasing by $3.5 billion year-over-year, reflecting a 38% margin driven by optimized infrastructure costs and server lifespan extension efforts. 📍Amazon’s advertising revenue reached $14.3 billion, growing 18.8% year-over-year. This increase underscores Amazon’s success in leveraging its extensive user base and AI-driven targeting capabilities to create a robust advertising ecosystem. ++ Financial Figures ++ Revenue: $158.9 billion, up 11% year-over-year, excluding foreign exchange impact Operating Income: $17.4 billion, up 56% YoY Free Cash Flow: $46.1 billion, up 128% YoY North America Sales Growth: 9% YoY International Sales Growth: 12% YoY Advertising Revenue: $14.3 billion, 18.8% YoY growth AWS Revenue: $27.5 billion, 19.1% YoY growth AWS Annualized Run Rate: $110 billion North America Operating Margin: 5.9%, up 100 basis points YoY International Operating Margin: 3.6%, up 390 basis points YoY AWS Operating Income: $10.4 billion, up $3.5 billion YoY Capital Investments Year-to-Date: $51.9 billion Expected CapEx for 2024: Approximately $75 billion ++ What It All Means for CPGs++ We're talking to global CPG leaders in commerce, media, brand and data & analytics teams, all around the world. We repeatedly come to this conclusion together. As digital and AI-driven transformations reshape consumer interactions, Amazon’s growth in AWS and digital advertising points to two critical avenues for CPG brands: 💡Invest in Cloud-Based Data Analytics and AI: AWS’s role in enabling scalable, data-driven solutions is essential for brands looking to enhance customer insights, drive personalization, and optimize supply chains. 💡Utilize Amazon’s Expanding Ad Ecosystem: Amazon's advertising growth reinforces its platform’s impact on consumer reach. For CPG brands, utilizing Amazon’s digital advertising capabilities offers a powerful route to targeted marketing and measurable engagement. 𝗧𝗼 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀, 𝗳𝗼𝗹𝗹𝗼𝘄 ecommert®, 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲 𝘁𝗼 𝗼𝘂𝗿 𝟭𝟬,𝟱𝟬𝟬+ 𝘀𝘁𝗿𝗼𝗻𝗴 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿 👇 #data #ArtificialIntelligence #CPG #ecommerce Microsoft Azure Google Cloud Security Google Microsoft Alibaba Cloud IBM Oracle Cloud Salesforce Tencent Cloud

Amazon Web Services (AWS) is going all-in on infrastructure — and the numbers are huge. We’re witnessing the largest infrastructure investment cycle in the company’s history — and it’s being driven by AI. Amazon confirmed plans to spend over $100 billion in CapEx this year. Amazon CEO Andy Jassy said during the Q1 2025 earnings call: “It’s useful to remember that more than 85 percent of the global IT spend is still on premises, so not in the cloud yet. It seems pretty straightforward to me that this equation will flip in the next 10 to 20 years. Before this generation of AI, we thought AWS has a chance to ultimately be a multi-100-billion-dollar-revenue run rate business. We now think it could be even larger.” “If you believe your mission is to make customers’ lives easier and better every day, you believe that every customer experience will be reinvented with AI. You’re going to invest very aggressively in AI. And that’s what we’re doing.” “While we offer customers the ability to do AI with multiple chip providers, and will for as long as I can foresee, customers doing AI at any significant scale realize that it can get expensive quickly. For AI to be as successful as we believe it can be, the price of inference needs to come down significantly. We consider this part of our mission and responsibility to help make it so.” “Our AI business has a multi-billion-dollar annual revenue run rate [and] continues to grow triple digit year over year percentages. And it’s still in its very early days. While there is good reason for the high optimism about AI, I conclude my AWS comments with a reminder that there is still so much on-premises infrastructure yet to be moved to the cloud. Infrastructure modernization is much less sexy to talk about than AI, but fundamental to any company’s technology and invention capabilities [and] developer productivity, speed, and cost structure. And for companies to realize the full potential of AI, they’re going to need their infrastructure and data in the cloud.” “I think we could be helping more customers drive more revenue for the business if we had more capacity. We have a lot more Trainium2 instances and the next-generation of Nvidia instances landing in the coming months. There are other parts of the supply chain that are a little bit jammed up as well, motherboards and some other componentry, and some of that just because there is so much demand right now. But I do believe that the supply chain issues, the capacity issues, will continue to get better as the year proceeds.” #ai #digitalinfrastructure https://lnkd.in/gYWGbkfG

Global spending on cloud infrastructure services reached $95.3 billion in Q2 2025, up 22% year on year. According to Canalys (part of Omdia), cloud demand increased due to AI consumption, revived legacy migrations, and cloud-native scale-ups. As hyperscalers advance their AI capabilities and applications, more customers are adopting multi-model approaches to meet specific cost and use-case requirements. In Q2 2025, Amazon Web Services (AWS), Microsoft Azure and Google Cloud continue to dominate this market with a 65% combined market share of global cloud infrastructure spending. Collectively, customer spending with these three hyperscalers increased 27% year on year. Microsoft Azure (39% y/y growth) and Google Cloud (34% y/y growth) continue to outgrow market leader AWS (17% y/y growth). When taking AWS share lead into account (bottom chart), in actual dollar terms, AWS’s year-on-year increase outpaced that of both Microsoft and Google Cloud. Hyperscalers are experiencing a significant increase in customer demand, with growth driven by AI-related workloads alongside a rebound in traditional migrations and continued capacity expansion by cloud-native enterprises. Investment in AI infrastructure continues to accelerate. In July, Google lifted its 2025 capital expenditure target from US$75 billion to US$85 billion; earlier, AWS projected total spending for 2025 to exceed US$100 billion, while Microsoft announced plans to invest approximately US$80 billion in infrastructure expansion in the current fiscal year. Yi Zhang of Canalys (part of Omdia) pointed out a key trend that customer demand for AI services is evolving from a primary focus on availability and ease of use to a greater emphasis on flexibility and fit-for-purpose model choice. An increasing number of enterprises are seeking the capability to switch between different AI models based on specific business requirements, enabling them to achieve an optimal balance of performance, cost and application fit. Amid this trend, AWS Bedrock, Azure AI Foundry and Google Vertex AI continue to broaden their portfolios of proprietary and third-party models, spanning the full spectrum of capabilities from high-complexity reasoning to low-latency response, thereby supporting a wider range of industries and workloads. Much like the entire $5.3 trillion tech industry, coopetition has become the norm in the generative AI landscape: vendors compete on model advancement and product capabilities even as they collaborate on compute capacity and model distribution. For example, AWS Bedrock aggregates models such as Anthropic’s Claude and OpenAI’s GPT, while OpenAI has added Google Cloud to its compute network to bolster capacity.