AWS growth slows to 28 percent as customers seek to control cloud costs

Amazon Web Services’ annual growth rate slowed again in its latest quarter as the public cloud giant saw growth in customers focused on controlling costs.

In Amazon’s third quarter of 2022, which ended Sept. 30, AWS growth slowed to 28 percent, with Amazon CFO Brian Olsavsky admitting that growth had fallen to the mid-20s by the end of the quarter.

This compares with the 37 percent and 33 percent year-on-year growth recorded in Q1 and Q2, respectively.

Recently turning 20, AWS has risen rapidly to become a top ten provider in the UK channel. Some partner bosses CRN who we spoke to in July believes the public cloud market leader’s channel strategy has room for improvement, however.

The cloud business generated $20.5 billion of Amazon’s $127.1 billion in third-quarter revenue and now boasts an annualized pace of $82 billion.

Amazon’s share price fell about 12% on the back of the results, as a weak sales forecast for the upcoming holiday season left investors cold.

Analyst ISG this month warned that customers were “hitting the brakes” on cloud-based projects, and Olsavsky acknowledged that macroeconomic uncertainty has prompted more AWS customers to control costs.

“And we’re proactively working to help customers optimize costs, just as we’ve done throughout AWS’s history, especially during periods of economic uncertainty,” he told Third Quarter Earnings Call.

“The breadth and depth of our service offerings allows us to help them do things like move storage to lower-cost tier options and shift workloads to our Graviton chips.”

Ultimately, the recession may turn out to be a plus for cloud computing compared to less flexible consumption patterns, Olsavsky said.

“When I talk about enterprise customers in AWS, yes, we work with customers to reduce their bills. Just like all companies, they want to reduce their costs when they face uncertainty in the market,” he said.

“I would say one really valuable point about cloud computing is that it turns fixed costs into variable costs for many of our customers, and we help them save money through alternative services or Graviton3 chips. There are many ways we can help them reduce their costs and still get great cost-effectiveness ratios.”