Amazon's Biggest Revenue Driver AWS Falls Prey To Macro Slowdown

Amazon Web Services has been Amazon.Com, Inc's AMZN most significant growth engine over the past decade, taking business from some of the most prominent tech vendors worldwide.
As fear of recession looms, companies are scrambling to reduce costs and be lean. Cloud computing expenses are one area where corporates are tightening budgets, CNBC reports.
As the Fed continued to lift interest rates to address rising prices, it has led to economic deterioration by consumers and businesses.
Amazon is aware of the macro challenges, and hence AWS employees are reaching out to clients to see how it can help optimize spending, said David Brown, AWS' vice president.
"If you're looking to tighten your belt, the cloud is the place to do it," AWS CEO Adam Selipsky said during his keynote presentation.
However, an investment firm Andreessen Horowitz analysis last year, painted a different picture. It showed that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.
Amazon is also offering a cheaper alternative, Graviton computing instances based on energy-efficient Arm-based chips alternative to standard Advanced Micro Devices, Inc AMD and Intel Corp INTC processors.
"We do see some customers who are doing some belt-tightening now," Selipsky told CNBC. Expedia Group, Inc EXPE CEO Peter Kern sees the cloud as an area where his company can reduce its fixed costs.
The National Football League (NFL), which used AWS to produce statistics and schedules, has also made conservative plans around costs. NFL is renegotiating the terms of the multi-year cloud agreement with AWS.
In Q3, AWS recorded a growth of 27.5%, outpacing Amazon's increase of 15%. AWS generated $5.4 billion in operating income, accounting for more than 100% of the profit of its parent company.
Price Action: AMZN shares closed lower by 1.43% at $94.13 on Friday.
Photo by Tony Webster via Flickr

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