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Amazon says AWS users are focused on 'optimising' as growth is sluggish

AWS growth was uncharacteristically slow this quarter as customers remain focused on optimising their current setups, but execs believe that help could be on the was as more companies look to integrate its AI tools

The changing habits of AWS users are being blamed for a slowing of the cloud compute giant's growth.

Amazon said that for the quarter, its second of the 2023 fiscal year, revenues were up 12 percent at $22bn with a net income of $5.4bn. While relatively strong, those numbers represent a decline from the meteoric growth numbers AWS had grown accustomed to seeing in recent years.

In rolling out the lackluster growth numbers, Amazon CEO Andy Jassy said that many of the vendor's customers, particularly the biggest spenders, had been trying to reduce their own costs, leading to less spending.

"Our AWS growth stabilized as customers started shifting from cost optimisation to new workload deployment," Jassy told analysts on the company's quarterly earnings call.

"AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models."

The sluggish growth was not entirely unexpected. Amazon itself has been cautioning over the shift to optimisation over much of the year, and industry pundits likewise believe that many cloud compute customers are weary in their spending.

IDC group vice president for worldwide research Rick Villars told The Stack that most companies our likely to remain cautious for the forseeable future, but there is a light at the end of the tunnel.

"Our latest discussions with IT leaders indicate that while they still fear recession, and remain ready to act, they are expecting to meet or exceed the conservative budget targets set at beginning of the year," Villars said.

Like many service providers, AWS is banking heavily on AI to help return it to the boom days.

When discussing the numbers, Jassy made a point of underlining Amazon's investments in AI fields including large language models and generative AI. The hope is that as companies begin to take an interest in AI integration and development, they will choose AWS to host the projects.

"I think we are in the very early instances, we are a few steps into the marathon," Jassy said.

"I think most companies are still figuring out how they are going to approach it, but it is very early."

Jassy's hope may not be just a pipe dream, either. Villars said that the extensive AI toolbox is one of the reasons why he remains optimistic AWS can return to its previous growth patterns.

"It is because the pervasive interest in generative AI from customer to boardroom has reignited the desire to spend money on innovation again, not just cost control," Villars explained.

"AWS' 'investment' puts it in a good place to capitalize in the long run."

If the market is any indication, investors agree. Amazon shares were up 8.75 percent in after hours trading.