Amazon Web Services CEO Adam Selipsky delivers a keynote during the AWS re:Invent conference in Las Vegas on November 29, 2022.

Noah Berger | Getty Images

Amazon said revenue at its cloud division rose 20% in the fourth quarter, slower than analysts had forecast and slower than the 27.5% growth rate in the third quarter.

Cloud growth appears to be slowing along with other parts of the technology industry, which boomed over the past decade and accelerated during the pandemic as businesses turned to services that could facilitate remote work.

Amazon Web Services leads the cloud infrastructure market with a share of nearly 39% in 2021, according to estimates by industry researcher Gartner. Microsoft Azure business and Google Cloud are the main competitors of AWS.

Microsoft said last week that revenue from Azure and other cloud services, which the company does not disclose in dollars, rose 31% year over year, up from 35% in the previous period. Google parent Alphabet reports earnings after a call on Thursday.

AWS’s overall revenue growth has slowed since 2015 as the segment has grown and competition has intensified. AWS generated $21.4 billion in revenue in the fourth quarter, accounting for 14% of Amazon’s total revenue. Analysts polled by StreetAccount had expected AWS to post revenue of $21.87 billion.

In an interview late last year at the company’s annual customer conference Reinvent, AWS CEO Adam Selipsky said that “we’re really seeing some customers tightening their belts right now.”

The AWS unit generated $5.2 billion in operating income for the quarter, nearly double the company’s overall revenue. But it decreased by almost 2%. It was the first quarter since at least 2015 that AWS failed to increase its operating profit for the year. AWS’ standalone operating margin is 24.3%, the lowest it has been since 2017.

At its Reinvent conference in November, AWS unveiled supply chain, cleanroom and security storage services. Also in the quarter, AWS announced data center regions in Spain and Switzerland.

Analysts at Oppenheimer, who have an equivalent buy rating on Amazon, wrote in a report this week that their research showed that customers are moving to discounted contracts, optimizing workloads and seeing easier usage as “the digital economy returns somewhat to other – a person”.

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