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Amazon's Cloud Falls Behind Its Retail Sales

Despite droves of enterprises around the world leaning on the cloud amid the COVID-19 pandemic, cloud market leader Amazon Web Services (AWS) has clocked its lowest year-over-year growth.

Parent company Amazon.com reported its earnings for its fiscal second quarter on Thursday. AWS earned $10.8 billion for the quarter ended June 30, falling short of Wall Street estimates of $11 billion. Operating income was $3.4 billion, exceeding estimates of $3 billion.

AWS revenue for the period increased by about 5.8% over the previous quarter, and by 29% over the same quarter last year. That's the cloud unit's lowest year-over-year increase since Amazon.com began reporting AWS revenues separately.

However, AWS growth has been slowly decelerating in recent years, and that hasn't put a dent in its market dominance. Analysts estimate that AWS owns one-third of the global cloud infrastructure services market, more than its three closest rivals -- including No. 2 Microsoft Azure -- combined.

This quarter is notable in that AWS, normally the fastest-growing of Amazon.com's three business units, has fallen to last place, behind strong growth in the North America (43% year over year) and International (38% year over year) retail segments. That is likely due to the COVID-19 pandemic driving online retail sales skyward as brick-and-mortar stores were forced to close.

AWS accounted for 12% of Amazon.com's total revenue, which came in at $88.9 billion for the quarter, surpassing estimates of $81.3 billion and marking a 40% year-over-year increase.

Microsoft, the closest competitor to AWS in the cloud (though by a distant margin), publicized its latest financial report last week. Its Azure cloud platform, like AWS, also experienced slowing growth in the period, increasing by 47% compared to 59% in the previous quarter.

About the Author

Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.

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