The News: Last week Amazon posted a strong revenue Q1 that was highlighted by the ongoing global pandemic that has driven droves of customers to the e-commerce giant. While some analysts were disappointed in the slight downtick in earnings (EPS), which came in below estimates, the company’s CEO, Jeff Bezos was outspoken that the company is going to continue to invest in op-ex and employee safety so the higher costs that are eating into gross margins are something to continue to look for in future quarters.
The company’s cloud business, Amazon Web Services delivered 33% growth as the business unit has eclipsed $10 Billion Q1.
See Amazon’s earnings highlights here.
Analyst Take: Listening to Jim Cramer from CNBC discussing Amazon’s earnings and specifically calling out the growth as “Not enough” left me a bit perplexed. All things considered, the company’s cloud business continued its streak of growth losing just one percent from the previous quarter usurping the $10 Billion dollar mark for the quarter. This leaves the company and its AWS business unit as the undisputed largest player in Cloud Infrastructure (IaaS). And yes, Microsoft and Google, are both fierce competitors, but based upon the size of their respective IaaS businesses, it will be expected to see the percentage growth rates maintain larger; this is the law of large numbers. Remember, growth has been steadily declining as a percent, but growing as a total revenue QoQ.
AWS revenue growth
– Q1 2017: 43%
– Q2 2017: 42%
– Q3 2017: 42%
– Q4 2017: 45%
– Q1 2018: 49%
– Q2 2018: 49%
– Q3 2018: 48%
– Q4 2018: 45%
– Q1 2019: 41%
– Q2 2019: 37%
– Q3 2019: 35%
– Q4 2019: 34%
– Q1 2020: 33%
Continuing AWS Growth Initiatives Despite COVID-19
To grow the AWS business, it will be a byproduct of new customer wins, expanding current customer spend as well as investing in new products and services that enables those wins and cross-selling activities.
This past quarter, AWS had a list of service expansions that were notable. (Read more in the highlights link above) This included the addition of new zones in Italy and Africa that takes the company’s count to over 76 zones in 24 regions. There have also been announcements of 9 more zones and 3 more regions–This continued expansion of the AWS footprint is an enabler of growth and right now when many company’s are cautious about investment, it is a good example of how AWS is approaching growth.
AWS Uses Its Tech to Support COVID-19
Outside of its more enterprising efforts, AWS also was heavily invested in supporting business, healthcare workers and research through its efforts around COVID-19.
A couple of things that caught my attention included Amazon offering tools like Chime and WorkSpaces along with a 12 month no charge AWS Free Tier. In healthcare, the company used its technology to create a centralized repository of datasets that helped better understand the characteristics and spread of the virus. This became known as the AWS COVID-19 Datalake. AWS also committed to be involved in the COVID-19 High Performance Computing consortium, which was a collaboration between a number of public and private sector companies and organizations looking to make computing resources available to support identifying diagnosis, treatment and vaccines for COVID-19.
The key here is to pay attention to the company’s commitment to investing resources in solving this global crisis, while not completely ignoring or sacrificing growth.
Overall Impressions on Amazon and AWS Going Forward
The cloud is an explosive growth area and there is no question that despite the global woes of COVID-19, the cloud will be at the core of business and government rebuilding into what is oft-described as our “New Normal.”
The growth seen in the last quarter for AWS, at 33% helping the business generate over $10 Billion in revenue in this period was really encouraging given the rapid slowdown seen in the last 30 days of the quarter and the law of large numbers that AWS is now facing. Remember, growth one quarter ago was only 33%, which means the overall revenue growth for the quarter was larger than the previous quarter.
AWS is also investing in its infrastructure expanding zones and regions while still launching new services despite the complex global situation. All of this, plus its technology was used to power this year’s NFL draft, which if nothing else, was one heck of a reprieve from the lack of live sports–which was a nice moment, that was powered by the cloud.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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The original version of this article was first published on Futurum Research.
Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. From Big Data to IoT to Cloud Computing, Newman makes the connections between business, people and tech that are required for companies to benefit most from their technology projects, which leads to his ideas regularly being cited in CIO.Com, CIO Review and hundreds of other sites across the world. A 5x Best Selling Author including his most recent “Building Dragons: Digital Transformation in the Experience Economy,” Daniel is also a Forbes, Entrepreneur and Huffington Post Contributor. MBA and Graduate Adjunct Professor, Daniel Newman is a Chicago Native and his speaking takes him around the world each year as he shares his vision of the role technology will play in our future.