AWS rakes in $12.7 billion in FY20, remains Amazon’s most profitable biz
Published 5 February 2021
The elevation of Andy Jassy as CEO casts the spotlight on Amazon Web Services (AWS), an unglamorous business, which for years has been the cash cow of Amazon.
Jassy, heralded as the man who built AWS to the size it has managed to reach today will be watched closely for the way in which he takes this business forward. This needs to be seen in the backdrop of competitors such as Microsoft with Azure, Alibaba and Google Cloud, all rolling up their sleeves to tap into a huge digitalisation boom happening globally. This push, due to Covid-19 pandemic, has forced many companies in the world to rearchitect their business processes, in an effort to stay relevant to their customers.
Slowing growth, a cause of worry?
On the day when Amazon announced that founder Jeff Bezos is stepping down from his role as CEO, the company revealed that its cloud computing arm, AWS, generated a $12.7 billion in revenue in Q4 of 2020.
To understand the numbers better, one needs to take a step back and understand AWS. Having been with Amazon since 1997, Jassy has been one of the main architects behind AWS since its inception in 2003, and subsequently its launch in 2006. He is credited with building Amazon’s cloud division to what has become one of the largest global cloud players today.
In many ways his rise can be compared to that of Satya Nadella of Microsoft who built the Azure business from scratch to in excess of $20 billion unit. Perhaps, by elevating Jassy, Amazon is attempting a similar mojo which Microsoft achieved.
The Q4 revenues grew 28 per cent growth year-on-year from $9.9 billion in Q4 of 2019. This means that AWS now represents 10 percent of Amazon’s total sales. At the outset these numbers look good. However, when examined closely, these numbers represent a falling growth rate.
For example, the Q4 numbers marks a continuation of incremental declines in growth on a percentage basis. AWS’ revenue grew 29 per cent in the third quarter of 2020 and its operating income, which jumped 37 per cent year over year to $3.56 billion. In comparison, operating income of AWS increased 56 per cent year over year in the previous quarter.
Dave Fildes, Amazon’s director of investor relations, said in the earnings call that AWS is continuing to grow at a meaningfully larger absolute dollar rate than others out there. “We’re improving infrastructure planning to meet the capacity needs given the growth we’re seeing. More broadly, our results reflect that balance between the investing, the price reductions, driving cost efficiencies. The margins are going to fluctuate quarter to quarter depending on those factors,” Fildes said.
AWS’ status as Amazon’s most lucrative business, and the company’s commitment to bring its cloud ventures to greater heights is further demonstrated by its latest decision.
Amazon said that AWS will continue to expand its infrastructure in different parts of the world, with a new AWS Asia Pacific (Hyderabad) Region coming in mid-2022, and the AWS Europe (Zurich) Region and AWS Asia Pacific (Melbourne) Regions available in the second half of 2022.
AWS ended 2020 with about $50 billion in backlog deals, an increase of 68 per cent year on year, Fildes said.