Amazon looks increasingly propped up by cloud services

Internet giant Amazon posted a mixed set of Q4 results, but its cloud division AWS clocked 40% growth.

Andrew Wooden

February 4, 2022

3 Min Read
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Internet giant Amazon posted a mixed set of Q4 results, but its cloud division AWS clocked 40% growth.

Amazon’s Q4 revenue came in at $137 billion, which was up 9% year on year, while net income was $14.3 billion, up 98%. However operating income decreased to $3.5 billion in the fourth quarter, compared with $6.9 billion in the previous year. Revenue in general was apparently lower than expected but there is still enough investor confidence as shares rose by as much as 17%, according to Investopedia.

Much like recent financials from Microsoft and Google, Amazon’s cloud business was a key driver for the quarter. Revenue for its cloud services unit AWS was up 40% – clocking in at a huge $17.8 billion. Conversely its Amazon.com retail business unit, where the whole thing started, recorded a massive $1.6 billion loss.

Perhaps in a move to stem some of the losses, Amazon also announced the price of its Amazon prime service in the US would rise by $12.99 to $14.99. There are also the costs of competing with Netflix, Disney and HBO et all in the streaming space that may have been factored in here.

“A big thank you to employees across Amazon who overcame another quarter of COVID-related challenges and delivered for customers this holiday season,” said Andy Jassy, Amazon CEO. “Given the extraordinary growth we saw in 2020 when customers predominantly stayed home, and the fact that we’ve continued to grow on top of that in 2021, our Retail teammates have effectively operated in peak mode for almost two years. It’s been a tremendous effort, and I’m appreciative and proud of how hard our teams have worked to serve customers.”

The CEO also noted some of the challenges to its retail division: “As expected over the holidays, we saw higher costs driven by labour supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

As well as these concessions, there were also some more specific negative outlook for the next quarter:

“Net sales are expected to be between $112.0 billion and $117.0 billion, or to grow between 3% and 8% compared with first quarter 2021. This guidance anticipates an unfavourable impact of approximately 150 basis points from foreign exchange rates. Operating income is expected to be between $3.0 billion and $6.0 billion, compared with $8.9 billion in first quarter 2021. This guidance includes approximately $1.0 billion lower depreciation expense due to increases in the estimated useful lives of our servers and networking equipment beginning on January 1, 2022.”

It is interesting that the fall in operating income and the outlook did not lead to a share price drop. Compare this with Facebook’s financials yesterday – in which a comparable picture resulted in a 20% stock drop.

The difference is that, while Amazon had the decent growth of AWS in its back pocket, Facebook had promises of a pivot to the metaverse. Investors were clearly more convinced by the solid, provable numbers its cloud division was yielding than the possibilities alluded to by Facebook and its ambitions in VR/AR platforms.

The other two leading hyperscalers – Google and Microsoft – also enjoyed significant cloud growth in their recent quarterlies. Microsoft’s revenue in Intelligent Cloud clocked in at $18.3 billion, an increase of 26%. Microsoft’s server products and cloud services revenue increased by 29%, and this was driven by a 46% growth for Azure and other cloud services. All of this propelled Microsoft’s  revenue for the quarter to an astonishing $51.7 billion – a 20% jump.

Google also generated massive bags of cash from its cloud offering, raking in in $5.5 billion revenue for the quarter, up from $3.8 billion the year before.

The pandemic accelerated some big changes to how we live and how we work, and more and more of the world each year seems to be underpinned in some way by cloud computing. And if the message wasn’t clear already, this is translating into incredible amounts of money for the big three that dominate the cloud market.

About the Author

Andrew Wooden

Andrew joins Telecoms.com on the back of an extensive career in tech journalism and content strategy.

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