Dive Brief:
- AWS plans to continue to invest in infrastructure build-outs amid growing demand for cloud computing and AI capabilities, Amazon CEO Andy Jassy said Thursday, speaking during the company’s Q3 earnings call. AWS joins Microsoft and Google in reporting accelerated AI growth this quarter.
- “AWS’s AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than three times faster at this stage of its evolution as AWS itself grew,” Jassy said. “And we felt like AWS grew pretty quickly.”
- AWS sales grew 19% year over year to $27.5 billion in the third quarter, which ended Sept. 30. The company expects capital expenditures to reach $75 billion by year-end and increase next year as AWS positions its infrastructure to meet customer demand.
Dive Insight:
AWS, Microsoft and Google enjoyed AI-fueled gains this past quarter. In response to surging demand, the hyperscalers plan to ramp up investing in the infrastructure enabling the technology.
Google Cloud revenue boomed over the last year, fueled by enterprise enthusiasm for Vertex AI and cloud database services. Google has funneled $38 billion into expanding its infrastructure so far this year, 80% more than the first three quarters of 2023. Capital investments will increase even more next year, executives said during an earnings call Tuesday.
Microsoft’s cloud revenue grew 22% year over year, down from a 24% growth rate during the same quarter last year. Microsoft’s AI business is expected to surpass annual revenues of $10 billion next quarter, becoming the fastest segment in company history to reach the milestone, executives said during the earnings call Wednesday. Microsoft’s capital and data center spending are expected to increase in the coming quarters in response to growing cloud consumption.
AI services, tools and models have proliferated in AWS platforms, including its model customization service Bedrock.
“Customers have many other requests, access to even more models, making prompt management easier, further optimizing inference costs,” Jassy said. “Our Bedrock team is hard at work making this happen.”
The cloud segment’s revenues represented nearly one-fifth of the company’s total revenue. AWS signed new and expanded agreements with several enterprise customers, including Capital One, T-Mobile and Toyota during the quarter.
“We’ve seen significant reacceleration of AWS growth for the last four quarters,” Jassy said.
Enterprises have benefited from vendors’ focus as services and solutions ease access to emerging applications and offer guardrails to mitigate risks. However, vendor-led hype around the technology has also murkied the waters for technology leaders tasked with guiding initiatives and setting the pace of adoption for the organization.
CIOs are aware of the cost and data challenges lying ahead and want to avoid overselling the technology’s benefits.
“With generative AI, it’s really easy to waste money,” Mary Mesaglio, distinguished VP analyst at Gartner, said during the firm’s IT Symposium/Xpo in October.
Jassy acknowledged the growing cost of AI adoption Thursday. “As customers approach higher scale in their implementations, they realize quickly that AI can get costly,” he said.
