AWS Q4 results mixed in 2022 headwinds

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Amazon has announced its financial results for the fourth quarter and full year, ended 31 December 2022, with revenue increasing nine percent to $149.2bn for Q4 and topping the $145.8bn Refinitiv expectations.

AWS revenue increased 20 percent in Q4 to $21.4bn, however, the figure falls short of the $21.87bn expected, according to StreetAccount estimates. For fiscal year 2022, AWS revenue increased 29 percent year-over-year to $80.1bn, but comes below the 37 percent growth seen in 2021.

AWS operating income was $5.2bn in Q4, decreasing from $5.3bn in fourth quarter 2021, and bringing AWS operating income for the full 2022 fiscal year to $22.8bn.

In total, Amazon revenue for the full fiscal year sits at $514bn, after a nine percent increase, but the mixed financial results prompted stock prices to fall in after-hours trading.

Like others in the industry, Amazon is said to be impacted by the unfavorable foreign exchange rates throughout the year, costing a further four percent rise, or $15.5bn, compared with 2021, as well as macroeconomic trends causing customers to spend less with the firm.

In Q4, AWS announced more cloud commitment and migration wins with Nasdaq and Yahoo Ad Tech, as well as a partnership with NFL for the NFL Contact Detection Challenge, using ML and computer vision.

AWS regions were additionally launched in Spain and Switzerland as well as a second region in India, and Accenture and Atos entered partnerships with AWS to accelerate time to innovation with the cloud.

Looking ahead to Q1 2023, Amazon is estimating revenues between $121-126bn, up 4-8 percent year-on-year. Operating income is expected to be between $0-4bn, compared with $3.7bn in first quarter 2022.

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” said Andy Jassy, CEO at Amazon. “Most enterprises right now are acting cautiously. And when you are being cautious, you look for ways that you can spend less money. 90-95 percent of the global IT spend remains on-premises. I don’t think on-premises will ever go away, but I really do believe in the next ten to 15 years that most of it will be in the cloud. It means we have a lot of growth in front of us in the AWS business.”

Brian Olsavsky, CFO at Amazon, said: “Starting back in third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize the cloud spending in response to the tough macroeconomic conditions. As expected, these optimization efforts continued into the fourth quarter. As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters. Stepping back, our customer pipeline remains healthy and robust, and there are many customers continuing to put plans in place to migrate to the cloud and commit to AWS in the long-term.”