Amazon Web Services Growth Hits 39%, Fastest Pace Since 2021

Amazon Web Services posted faster-than-expected growth in the third quarter, with revenue rising 39% from a year earlier to $45.98 billion. Analysts polled by StreetAccount had forecast $45.29 billion, according to figures in the company's statement. The unit's growth in the second quarter was about 37%.

The 39% rate is the highest for AWS since the fourth quarter of 2021. On a conference call with analysts, Amazon CEO Andy Jassy said, "Our core compute and storage revenue grew at their fastest rates in several years."

Profit also topped forecasts. AWS generated $17.77 billion in operating income for the quarter, a 55% increase and above the $16.97 billion consensus from StreetAccount. The segment now makes up almost 23% of Amazon's total revenue, a record share.

Amazon is still the largest cloud provider by revenue, but its rivals are speeding up as well. Alphabet said on Wednesday that its Google Cloud business, which includes infrastructure and Google Workspace subscriptions, more than doubled in the third quarter. Microsoft also reported on Wednesday, publishing for the first time an earnings report that gave Azure revenue in dollars. Azure is now 72% the size of AWS, compared with 58% two years ago.

The major cloud companies are all racing to build data centers able to meet strong demand for artificial intelligence. During the quarter, AWS announced plans to broaden its lineup of Nvidia graphics processing units that handle AI workloads. The company's statement also said AWS acquired the data analysis startup DuckLabs and signed deals with Meta and OpenAI.

Jassy offered an ambitious outlook. "With our continued pace of innovation, new core and AI functionality, enterprises wanting to run their core and AI workloads in AWS, and the amount of capacity that we're adding each year, we believe that AWS can grow north of 40% in each of 2027 and in 2028, and be a trillion-dollar revenue business in the next five to 10 years," he said.

Amazon also plans a shift in how it sells its AI hardware. Google has boosted its cloud revenue by offering its tensor processing units for AI outside its own facilities, and Amazon will follow a similar path with its Trainium chips, which are used to train models. "With Trainium demand so strong, customers continue encouraging us to make it available outside of AWS. We intend to do so late in 2027," Jassy said.

AWS is the oldest of the big three cloud platforms. Its first services appeared in 2006, ahead of both Azure and the Google Cloud Platform.