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AWS revenue tops $10 billion in Q1, Bezos pledges Q2 profit on COVID-19 spend

Amazon Web Services (AWS) revenue topped $10.22 billion in the first quarter of 2020, up 33% compared to the same quarter last year, which gives the public cloud business a $41 billion annual run rate.

“We’ve continued to see a healthy adoption of our [AWS] business and healthy usage, not only in United States but globally,” said Amazon CFO Brian Olsavsky on a conference call with investors, adding that the cloud business “has not been impeded by this COVID crisis yet.”

But despite its cloud growth, Amazon reported overall net income decreased to $2.5 billion in Q1, down $1 billion from the $3.6 billion that the company reported in the first quarter of 2019.

$4B for COVID-19 Costs

The bigger news, however, wasn’t about Amazon’s Q1 earnings but rather a statement from CEO Jeff Bezos that the company will spend $4 billion or more — all of its expected Q2 profit — on COVID-19 related costs. “If you’re a shareowner in Amazon, you may want to take a seat,” Bezos said in a statement. “Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”

This will include spending money on gloves and face masks, deep cleaning Amazon facilities, processes that enable social distancing, higher wages for hourly employees, and “hundreds of millions to develop our own COVID-19 testing capabilities,” Bezos said. “The best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.”

Amazon’s earnings cap a week that saw all three major public cloud providers report revenue growth over the most recent quarter. While AWS continues to dominate the Q1 market, No. 2 Microsoft reported its Azure public cloud revenues surged 61% year over year. While it doesn’t provide a dollar amount specific to Azure, Microsoft’s Intelligence Cloud business, which includes Azure, Windows Server, SQL Server, and GitHub increased to $12.3 billion for the quarter.

Meanwhile, Google earlier this week reported a 52% year-over-year increase in its cloud revenues to $2.78 billion for its most recent quarter.

AWS, Azure Control More Than Half of Q1 Cloud Market

More than half of the Q1 cloud market belongs to AWS and Microsoft, according to Synergy Research Group. The firm’s analysis shows Amazon with a 32% market share, Microsoft at 18%, and Google at 8%. Behind the big three, Alibaba and IBM both have 5% of the market, Salesforce has 3%, and Oracle, Tencent, Rackspace each have 2%.

Synergy says overall first-quarter spending on cloud infrastructure services hit $29 billion, up 37% year over year, and “showed no meaningful negative impact as a result of the COVID-19 pandemic.”

Similar to their past performance, Amazon growth continued to mirror overall market growth, while second-ranked Microsoft once again outpaced the overall market by more than 20 percentage points. Microsoft grew its market share by almost 3 percentage points in the last four quarters, reaching 18%. Meanwhile Google, Alibaba, and Tencent all outpaced overall market growth and gained market share. All three saw revenues increase by 45% or more year on year.

“For sure the pandemic is causing some issues for cloud providers, but in uncertain times the public cloud is providing flexibility and a safe haven for enterprises that are struggling to maintain normal operations,” said John Dinsdale, chief analyst at Synergy Research Group. “Cloud provider revenues continue to grow at truly impressive rates, with AWS and Azure in aggregate now having an annual revenue run rate of well over $60 billion.”

―SDX Central

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