On Thursday, Amazon CEO Andy Jassy scrambled to calm investors' concerns about the company's cloud and the growth of the AI business.
Wall Street didn't buy it.
Jassy has followed strict analyst questions about AWS' growth and its position in the AI race. The stock fell 7% in trading outside of business hours, overwhelmed by disappointing profit guidance and Jassy's vague response to AI.
During the call, Jussy was asked about the rival company's “cloud growth will be significantly faster.” AWS reported revenue growth of 17%, much slower than Microsoft and Google's cloud business.
Jassy said AWS has a much larger revenue base, making it difficult to compare growth rates. He also said that while AWS has better security and capabilities than its peers, it emphasizes its “pretty important” leadership position in cloud market share.
“This is a $123 billion annual revenue driving fee business, which is still too early,” Jassy said, referring to AWS annual sales figures. “It's a very unusual opportunity for us to be very bullish.”
Morgan Stanley analyst Brian Novac asked Wall Street's “Now that AWS is late” with AI, asking with concerns about losing shares to competitors.
Jassy has begun a vast response, calling the AI market “early” and “top heavy”, dominated by a small number of popular models and apps. He pointed out AWS' low-cost training AI chips as a potential draw for customers looking for AWS' low-cost performance. He rattled new agent tools and developer capabilities before returning to familiar territory, comparing today's AI shift to the early days of the original cloud boom, pioneering.
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“Remember that 85% to 90% of global IT spending is still on-premises,” Jassy said. “If you believe that the equation will turn over, with what I do, we have a lot of legacy infrastructure you have to move on.”
Colin Sebastian, senior research analyst at Baird, told BI that despite AWS' continued growth, the market response is concerning.
“In contrast to the growth of Azure and Google Cloud Platform, it's difficult to disprove the new Wall Street story of competitors gaining status and momentum from AWS,” he said.
During the call, Jassy added that AWS has capacity issues across electricity, chips and server components, with power being the “single biggest constraint.” He said it would likely take several quarters to meet the demand shortage.
One sign of encouragement for AWS is that this cloud market share has been barely occurring in the past year. According to Synergy Research, in the second quarter, the market share of the top three cloud providers remained almost flat, with AWS at 30%, while Microsoft and Google held at 20% and 13% respectively.
An Amazon spokesman declined to comment.
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