AWS’s three-year-old AI business has already reached a revenue run rate of $20 billion, which is 260X higher than the $58 million run rate AWS’s legendary cloud business reached at the end of its third year, Amazon CEO Andy Jassy said last week.
That’s a powerful insight from the founder and former CEO of the AWS business, who five years ago rode the remarkable success of AWS to the top spot in parent Amazon, succeeding founder Jeff Bezos in July 2021 as the leader of one of the world’s largest and most-innovative companies.
Continuing to make AWS the centerpiece of Amazon’s quarterly earnings calls, Jassy opened his remarks on Amazon’s overall performance by describing how the AI Revolution has dramatically re-accelerated AWS’s growth and positioned it for significant growth well into the future.
“We’ve never seen a technology grow as rapidly as AI and Amazon is already a leader,” Jassy said before showcasing the impressive performance of AWS in Q1.
“Starting with AWS: growth continued to accelerate, up 28% year-over-year, the fastest growth rate in 15 quarters, up $2 billion quarter-over-quarter, the largest Q4 to Q1 AWS revenue increase ever.
“AWS is now a $150-billion annualized-revenue run rate business,” Jassy said.
“The last time we saw growth at this clip, AWS was roughly half the size.”
Jassy went on to cite four specific reasons behind the success of AWS’s AI business, and I’ll get to those in a moment. But I first want to put the AWS Q1 performance in context relative to hyperscaler competitors Google Cloud, Oracle, and Microsoft:
- AWS was the slowest-growing of the hyperscalers. For the same period, Google Cloud grew at an eye-popping 63% and Microsoft — whose cloud business is almost 50% larger than AWS — grew at 29%. And Oracle, for the quarter ended Feb. 28, reported cloud growth of 44%. You can read my full analysis of the relative performances in “Google Cloud Blows AWS Away in Q1 Revenue, Backlog Growth.”
- And in backlog/RPO growth, AWS once again was the slowest-growing: Oracle topped the list at 325% RPO growth, Microsoft posted 99% RPO growth, Google Cloud reported 93% backlog growth, and AWS delivered 49% backlog growth. For more on those powerful forward-looking numbers, please see “Hyperscaler Backlog Soars to $2 Trillion: Greatest Growth Market World Has Ever Known!“
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4 Key Reasons Behind AWS’s AI Surge
Digging into the drivers behind the creation of a $20-billion run rate in just three years, Jassy cited the following:
1. “We’ve built broader capabilities than others”
To support that contention, which strikes me more as aspiration than fact, Jassy cited these and other AWS products:
- model building with SageMaker;
- high-performance inferencing with Bedrock, “which saw 170% growth in customer spend quarter-over-quarter,” Jassy said. “It processed more tokens in Q1 than all prior years combined.”
- OpenAI GPT 5.4 is now available in Bedrock, and 5.5 is coming soon;
- the preview of Amazon Bedrock Managed Agents, powered by OpenAI to help organizations build generative AI applications and agents at production scale; and
- “Most of the value companies derive from AI will be through agents,” Jassy said, “and AWS customers can build agents with their proprietary data in Strands, which has been downloaded more than 25 million times and saw 3X more downloads quarter-over-quarter.”
2. Keeping AI, data, and apps close together
“Another reason customers continue choosing AWS,” Jassy said, “is that as they expand their use of AI, they want their inference to reside near their other applications and data, and much more of it resides in AWS than anyplace else.” (Is that last part really true? I’m not so sure.)
3. Life beyond AI
“Third, as customers expand their AI usage, they also want to consume additional non-AI services,” Jassy said. “They’re choosing AWS because we’ve built the broadest and most capable core offerings by a wide margin.” [Is that true? More than Microsoft? More than Google Cloud?] “We offer thousands of features across compute, storage, databases, analytics, security, and more.”
4. Keeping your business secure
Jassy then claimed AWS “has the strongest security and operational performance of any AI and infrastructure provider.” Almost by default, AWS security must be better than Microsoft’s — but better than Google Cloud’s? Better than Oracle’s? Until Jassy backs up that claim with some cold hard facts, customers should take that as opinion rather than objective reality.
Final Thought
The upshot here is that while a booming AI business is clearly a major factor behind AWS’s resurgence, Jassy’s various claims of “Just trust me!” regarding the absolute superiority of the AWS portfolio are not being backed up by financial data across all four hyperscalers.
While AWS is doing very well, and while it has a fast-growing AI business, its competitors are growing faster — in some cases much, much faster — and are thereby taking share from AWS.
And as striking as the 260X comparison in the headline might be, it should not in any way obscure the fact that AWS’s competitors — Google Cloud, Oracle, and Microsoft — are all outperforming AWS in the marketplace, which is the ultimate measure of success.
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