Amazon flags slowing growth in cloud business

Ecommerce giant Amazon reported better-than-expected revenue in the January-March quarter, but also raised concerns over slowing growth in the cloud business as its customers trimmed spending.

Revenue for the quarter stood at $127.4 billion, higher than expectations of $124.5 billion. Amazon returned to profitability during the quarter, reporting a $3.2 billion net profit, against a $3.8 billion loss in the same period last year.

However, concerns emerged over Amazon Web Service (AWS), the company's cloud business, as sales rose 16% from the year before to $21.4 billion. This is slower than the 37% that Amazon reported a year ago.


Chief financial officer Brian Olsavsky said cloud customers kept trying to pare their bills as of the ongoing second quarter and that Amazon was helping them do so to build long-term relationships.

In April, Amazon said in a call with investors that AWS growth had slowed 11% more.

Amazon CEO Andy Jassy, however, said the growing adoption of generative AI represented a huge opportunity for Amazon's cloud.

The cost cuts have run deep. Amazon has moved to axe 27,000 corporate roles since November and its headcount has fallen 10% to 1.47 million full and part-time workers, including in warehouses, as of the just-ended quarter.

The company has ramped up its cost-cutting measures in recent months. Amazon has announced two rounds of layoffs, impacting nearly 27,000 employees, and cancelled some products as well.

The slowdown in the cloud business comes at a time when Amazon is facing a threat from rivals Microsoft and Google, which are rolling out advanced artificial intelligence tools.

The cloud business

Announcing its quarterly results on Tuesday, Microsoft said Azure cloud-computing revenue in its fiscal third quarter rose 31% to $14.52 billion, slowing from 46% growth in the year-earlier period. Further, Microsoft forecast cloud growth in the range of 26% to 27% for the June quarter.

But Microsoft said its forecast for 26% to 27% Azure cloud growth in the June quarter includes 1% of revenue from new artificial intelligence services.

Meanwhile, in the March quarter, Google said its cloud-computing revenue rose 28% to $7.45 billion, missing estimates of $7.46 billion by a whisker. Google's cloud business posted revenue growth of 44% in the year-earlier period.

Parent company Alphabet said Google’s cloud business had turned profitable for the first time in the three years it has been reporting operating metrics for the division.

The segment generated $191 million in operating income on $7.45 billion in revenue in the first quarter, according to Alphabet’s earnings statement. In the year-ago quarter, the unit reported a $706 million loss on $5.82 billion in revenue.

Dropbox chief executive officer Drew Houston said growth in the company's core cloud business was slowing as challenges from the economic downturn put pressure on customers, making some of its profitable investments no longer sustainable.

The cloud storage provider on Thursday said it would reduce its global workforce by 16% to cut costs amid slowing cloud growth.

(With inputs from Agencies)