E-commerce giant Amazon has warned investors about the decelerating growth in its cloud computing division, Amazon Web Services (AWS), even as the company implements aggressive cost-cutting measures and invests in artificial intelligence.
Bloomberg reports that Amazon is the largest provider of rented computing power and software services worldwide, but it faces fierce competition from companies like Microsoft and Google. The internet giant reported the weakest growth rate since it started disclosing the unit’s sales at a meager 16 percent increase in AWS revenue, totaling $21.4 billion in the company’s Q1 financial results. In a conference call with reporters, Amazon CFO Brian Olsavsky attributed this slowing growth, in part, to the company’s incentives for signing longer-term contracts, such as discounts, as customers have grown more frugal with their spending.
ROMEOVILLE, IL – AUGUST 01: Workers pack and ship customer orders at the 750,000-square-foot Amazon fulfillment center on August 1, 2017 in Romeoville, Illinois. (Photo by Scott Olson/Getty Images)
Amazon’s total revenue for the first quarter increased by 9.4 percent to $127.4 billion, exceeding the projected $124.7 billion despite the slowdown in cloud computing. The company says it has continued to make significant cost-cutting efforts, including the elimination of 27,000 jobs, the largest job cut in Amazon history. Since there is less demand for cloud services, most of these layoffs affect AWS employees, reflecting the company’s need to streamline its workforce.
Amazon has shifted its focus to selling services and advertising to independent merchants who rely on the platform in an effort to accelerate growth and counteract the slowdown in its cloud computing and core e-commerce businesses. In Q1, sales of advertising increased by 21 percent to $9.51 billion, while sales of seller services increased by 18 percent to $29.8 billion.
CEO Andy Jassy highlighted Amazon’s 25-year history of machine learning investment during a conference call with analysts. In order to emphasize the company’s commitment to artificial intelligence, Jassy said, “It’s deeply ingrained in everything we do.” Additionally, he disclosed that Amazon is working on computer chips that can accommodate the capacity needed for training large-language models like OpenAI’s notoriously leftist ChatGPT. These chips might strengthen Amazon’s position as a pioneer in AI and give businesses more tools to tailor AI to meet their particular requirements.
The success of Amazon’s cost-cutting initiatives and ongoing focus on artificial intelligence will be crucial factors in determining the company’s future performance as it continues to navigate the challenges of slowing growth across its cloud computing and core e-commerce divisions. Given that Amazon’s operating income is largely derived from AWS, the company’s long-term success will depend on its capacity to adjust to shifting market dynamics and maintain profitability in this crucial area.
Read more at Bloomberg here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan