Amazon Q4: AWS’ Annualized Revenue Run Rate Hits $71B

Amazon Web Services, the industry’s largest cloud computing provider, reported its fourth consecutive quarter of revenue growth rate acceleration

Amazon Web Services (AWS) turned in a record fourth-quarter performance with 40 percent growth that put it on track for a $71 billion annualized revenue run rate, up from $64.4 billion in the prior quarter.

AWS, the industry’s largest cloud computing provider, added more revenue year over year in the fourth quarter than any quarter in its history, Brian Olsavsky, chief financial officer of parent company Amazon.com, said during an earnings call Thursday with financial analysts.

It was AWS’ fourth consecutive quarter of revenue growth rate acceleration.

AWS revenue increased 40 percent to $17.78 billion for the three months that ended Dec. 31, 2021, compared to the same period of 2020, when AWS had its strongest quarter-over-quarter growth since its 2006 launch.

Olsavsky attributed AWS’ revenue growth rate to a combination of factors, including beefing up its sales and marketing resources in the last few years.

“That is starting to pay off,” he said.

AWS also is lapping some cutbacks in customer spending in the early part of 2020, when the coronavirus pandemic started.

“Different companies have different COVID experiences: Some their volumes went through the roof; some their volumes went through the floor,” Olsavsky said. “As things have stabilized, I think the lasting thing is that a lot of people made the commitment to go to the cloud, better understood the benefits of that and probably accelerated their internal timelines for that.”

Fourth-quarter customer wins for AWS included Nasdaq announcing a multi-year partnership to migrate its North American markets to AWS along with its core matching engine technology. Retailer Best Buy selected AWS as its preferred cloud provider for cloud infrastructure services, and Meta, the parent company of Facebook, Instagram and WhatsApp, chose AWS as its long-term strategic cloud provider to accelerate artificial intelligence research and development. In the automotive industry, Stellantis — the parent company of Chrysler, Dodge, Fiat Jeep and Ram — picked AWS as its preferred global cloud provider for vehicle platforms to help create new digital products and upskill its global workforce.

The fourth quarter was the second financial reporting period with Adam Selipsky as CEO of AWS and Andy Jassy – the founding CEO of AWS – as CEO of parent company Amazon.com in place of Jeff Bezos. Selipsky and Jassy started in their new roles last July 5.

“As cloud popularity and investments only increase, it’s no surprise that Amazon’s Q4 earnings reflect growth for AWS,” said Gordon McKenna, chief technology officer of public cloud at Ensono, an AWS Advanced Consulting Partner and managed services provider based in Downers Grove, Ill. “AWS serves as a backbone for organizations across all industries as they continue to develop in this virtual and remote world. If there’s one thing organizations can learn from AWS, it’s to continue to innovate within a broad range of industries to meet customer needs.”

Amazon also announced that it’s updated the useful life of its servers to five years from four and its networking equipment to six years from five years.

“This really reflects a tremendous team effort by AWS to make our server and network equipment last longer,” Olsavsky said. “We’ve been operating at scale for over 15 years, and we continue to refine our software to run more efficiently on the hardware. This then lowers stress on the hardware and extends the useful life both for the assets that we use to support AWS’ external customers as well as those used to support our own internal Amazon businesses.”

Overall Amazon Results

Amazon’s overall performance pleased investors. Amazon’s stock was trading at $3,173.02 per share as of 7:25 p.m. — up 14.26 percent — after closing down 7.81 percent to $2,776.91 in regular trading as part of a technology sector sell-off.

Amazon.com reported overall revenue of $137.4 billion in the fourth quarter, a 9 percent increase from the $125.6 billion it recorded in the fourth quarter of 2020. Analysts, on average, had expected $137.88 billion in revenue and earnings per share of $3.89, according to Zacks Investment Research.

“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” Jassy, who was not on the call with analysts, said in a statement. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic. When you combine how we’re staffing and scaling our fulfillment network to bring even faster delivery to more customers, the extraordinary growth of AWS…the addition of marquee new entertainment like “The Lord of the Rings: The Rings of Power” and “Thursday Night Football” and a plethora of new capabilities that we’re building in areas like Alexa, Ring, grocery, pharmacy, Amazon Care, Kuiper and Zoox, there’s a lot to look forward to in the months and years ahead.”

Amazon for the first time has separated its advertising services revenue from other revenue. Fourth-quarter revenue from advertising services revenue grew 32 percent to $9.7 billion from the same quarter of 2020.

“We’re excited to continue innovating in areas like sponsored ads, streaming video and measurement,” Olsavsky said.

Amazon’s fourth-quarter net income increased 98 percent to $14.3 billion, or $27.75 per share — compared with $7.2 billion, or $14.09 per share, in the same period of 2020 – due to a $11.8 billion pre-tax valuation gain from its investment in Rivian Automotive, which had an initial public offering (IPO) in November. The Irvine, Calif.-based electric vehicle maker’s IPO, which raised approximately $11.9 billion, was the sixth largest in U.S. history and the largest of 2021.

Amazon Prime Fee Hikes For Members

Citing the continued expansion of Amazon Prime member benefits and increased costs for wages and transportation, Amazon said it will increase the costs of a Prime membership in the United States for the first time since 2018. Monthly Prime membership fees will increase 15.4 percent to $14.99 from $12.99. The cost of an annual Prime membership will increase 16.8 percent to $139 from $119.

The price changes will take effect on Feb. 18 for new Amazon Prime members and on the next renewal dates after March 15 for current members.

“We look at the relative price of the customer versus our cost to supply that and the usage and the value that we’re creating for customers,” Olsavsky said. “We felt — especially after not raising the price in the United States since 2018 — that the time was right to raise it. We think it’s a much more valuable program today than it was in 2020, let alone 2018.”