Based on a bizarre statement made during Amazon’s Q4 earnings call earlier this month, CEO Andy Jassy either made a very serious math mistake or he’s unaware that crosstown rival Microsoft qualifies as a “cloud provider” — despite the glaring fact that Microsoft’s cloud business is about 40% larger than Amazon’s.
Now, since Jassy has been presiding very successfully over one of the world’s largest, most powerful, and most influential corporations for almost two years, I think we can definitely rule out a math error as the cause of his utterly tone-deaf and misleading earnings-call comment. So that leaves us with no other explanation for his absurd statement other than he wants to believe — and wants everyone else to believe — that Microsoft is not a “cloud provider.”
Here’s the comment from Jassy that made my head spin, with the key portion highlighted:
“Shifting to AWS, revenue in the quarter grew 13% year over year in Q4 versus 12% year over year in Q3, and we’re now approaching an annualized revenue run rate of $100 billion. We watch the incremental revenue added each quarter and in Q4, AWS added more than $1.1 billion of incremental quarter-over-quarter revenue, which on an FX-neutral basis is more than any other cloud provider as far as we can tell.”
This excerpt came during Jassy’s opening remarks during the company’s Q4 earnings call on Feb. 1. Here’s the link to the audio webcast, and the excerpt I’ve cited above begins at the 6:54 mark and lasts about 26 seconds.
Now, AWS deserves a great deal of credit for adding more than $1.1 billion of incremental quarter-over-quarter revenue, which pushed AWS’s Q4 revenue up 13.2% to $24.2 billion from Q3’s $23.1 billion. And their arrival on the threshhold of a $100-billion run rate is extremely impressive, particularly given the ferocious competition AWS has triggered since creating the cloud-infrastructure category 18 years ago.
But where I believe Jassy did himself and his company a disservice was in this part of the excerpt: “…which on an FX-neutral basis is more than any other cloud provider as far as we can tell.”
That’s because for the same three-month period ending Dec. 31 to which Jassy was referring, Microsoft Cloud revenue jumped by $1.9 billion on the same quarter-over-quarter basis used by Jassy. I’m not aware of any crazy FX (foreign-exchange) issues from Microsoft relating to those quarterly results, but perhaps I missed something that accounts for Jassy’s otherwise baffling claim.
Let me spell out the details side by side for the quarter ended Dec. 31, 2023, which for Amazon is Q4 and for Microsoft is Q2 of its 2024 fiscal year:
- AWS Q4 revenue was $24.2 billion, up $1.1 billion over Q3’s $23.1 billion;
- Microsoft fiscal-Q2 revenue was $33.7 billion, up $1.9 billion over fiscal-Q1’s $31.8 billion.
Now, I realize math can be hard, but by what logic is $1.1 billion a bigger revenue total than $1.9 billion? Microsoft’s numbers came out 48 hours before Amazon’s, so Jassy was surely fully familiar with his rival’s results. So how in the world could Jassy claim in an extremely public forum that AWS’s quarter-over-quarter increase of $1.1 billion “is more than any other cloud provider as far as we can tell”??
As I see it, there can be only two explanations for Jassy’s claim that AWS’s quarter-over-quarter revenue increase of $1.1 billion “is more than any other cloud provider as far as we can tell”:
- Jassy doesn’t consider Microsoft to be a cloud provider; or
- Jassy is stuck in the long-ago past of the cloud business when “cloud” equated to “cloud infrastructure.” In that context, software-as-a-service (SaaS) applications and many other cloud services simply aren’t cloud — I’m not sure how AWS classifies them, but based on Jassy’s dubious declaration, they’re not something a true “cloud provider” offers.
To me, both of those possible explanations sit somewhere between ridiculous and absurd.
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Final Thought
Whatever Jassy might believe about what does and does not define a “cloud provider,” business executives tying their companies’ futures to the cloud harbor no such fanciful distinctions. In the minds of business customers shelling out hundreds of billions of dollars each year for cloud services of every type, the cloud is much more than infrastructure. They see it as the modern way to deploy apps and data and GenAI and security and app-dev and analytics and integration and much, much more. It is all of those things and more.
The very notion that here in early 2024, as the GenAI Revolution’s fantastic momentum has been enabled by and now encompasses every facet of the cloud, the term “cloud provider” would apply only to infrastructure is simply absurd. Sure, I can see why Andy Jassy would try to play that word-game and ultimately attempt to delude people into believing that $1.1 billion is somehow bigger than $1.9 billion.
But that is the ultimate exercise in — and I have never used this term before — cloud-washing. It does not reflect reality, and it does not reflect how business executives view the cloud.
And it does not reflect well on either AWS or Andy Jassy, a legendary executive with a brilliant track record who’s far too capable and successful to be playing word-games while the business world depends on his company and its competitors to help lead those customers into the future.
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