Adam Selipsky, CEO of Amazon Web Services, speaks during the Bloomberg Technology Summit in San Francisco on June 22, 2023.

David Paul Morris | Bloomberg | Getty Images

Amazon said on Tuesday that revenue from its cloud unit grew 17% year over year in the first quarter, a faster pace than Wall Street expected.

Amazon Web Services revenue totaled $25.04 billion, according to the company’s earnings report. Analysts polled by StreetAccount had expected $24.49 billion. The growth marks a step up from the 13% growth Amazon reported for AWS in the fourth quarter.

While Amazon remains primarily an online retailer, the company has become a major player in information technology, supplying large companies, startups and governments with computing resources, database software and networking services. AWS accounts for 17% of Amazon’s total revenue of $143.313 billion.

The cloud is also a reliable source of profit for Amazon, thanks to high software margins. AWS generated $9.42 billion in operating revenue, or about 62% of Amazon’s total revenue. Analysts polled by StreetAccount had expected $7.52 billion in AWS operating revenue. AWS’s operating margin expanded to 37.6%, the widest since at least 2014.

Last week, Google and Microsoft both reported accelerating cloud growth. Amazon remains the larger of the two in a market that is growing faster than other areas of information technology, including data center devices and systems, according to an industry researcher Gartner.

During the quarter, Amazon said it has completed a $4 billion investment in startup Anthropic, which relies on AWS chips to train artificial intelligence models. Adam Selipsky, CEO of AWS, said Axios in an interview that Anthropic offers “the leading models on the market right now” in some areas. Google, which invested in Anthropic earlier, offers its own AI models, as well as Microsoft-backed OpenAI.

“We’ve already built up multibillion-dollar revenue,” Andy Jassy, ​​Amazon’s CEO and former head of AWS, said on a conference call with analysts, talking about generative AI. Analysts estimate that Microsoft has billions in annual cloud revenue tied to AI as well.

Amazon saw further reductions in cloud optimization efforts during the quarter as many organizations scrambled to get the most out of their cloud spending, Brian Olsavsky, the company’s chief financial officer, said on the call.

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https://www.cnbc.com/2024/04/30/aws-q1-earnings-report-2024.html