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Amazon will run its servers and networking kit for another year — both for its own operations and for Amazon Web Services — and hopes to save $1 billion in the next quarter.
“We are forward-looking updating the useful life of our servers and network equipment beginning in January,” Chief Financial Officer Brian Olsavsky told investors during Amazon.com’s earnings call for the fourth quarter 2021 and fiscal year 2021.
“We’ve been operating at scale for over 15 years and we continue to refine our software to run more efficiently on hardware,” enthused the CFO. “This then reduces stress on the hardware and extends useful life, both for the assets we use to support external AWS customers as well as those used to support our own internal Amazon business. .”
Amazon and AWS will therefore assume that the servers have a useful life of five years and that the network kit can operate for six years. Both numbers add a year to previous performance expectations.
We continue to refine our software to run more efficiently… this reduces stress on hardware and extends its useful life
Olsavsky told investors the decision would mean Amazon.com’s amortization expense would drop $1 billion in the next quarter, though that number will decline over time.
Earlier this week The register reported that in June 2021, Google made the same decision to keep its cloud hardware running for an additional year and thereby recorded $2.6 billion in depreciation savings.
AWS continued its strong growth. Fourth-quarter revenue of $17.8 billion saw the cloudy concern end 2021 with revenue of $62.2 billion, 38% higher than its $45.4 billion haul for fiscal 2020 The 2021 total means AWS is now bigger, measured by revenue, than established industry titans Lenovo, IBM, Cisco, Oracle and HPE.
The cloud giant’s run rate is now $71 billion a year, up from $51 billion at the same time last year.
Olsavsky attributed AWS’s growth to the increased size of its sales force and additional marketing. The CFO also said the market has stabilized, with customers whose spending plunged at the start of 2020 spending again. Supply chain issues should not hamper growth, he added.
The earnings announcement showed just how important AWS has become to Amazon, in terms of generating revenue. For 2021, the entire Amazon business had revenue of $469.8 billion, which generated operating profit of $24.9 billion. AWS alone accounted for $18.5 billion.
Do the math: Amazon.com’s $407 billion in business generated $6.4 billion in operating revenue, and AWS’ $62.2 billion in revenue generated the rest.
Congratulations, AWS users: you made this possible.
Another item of interest in Amazon’s results was the inclusion for the first time of a line item for advertising revenue – all $31 billion in fiscal 2021. That’s still far behind the Facebook’s FY21 ad revenue of $115 billion or even Google’s $61 billion. scored through ads in Q4 2021 alone. But Olsavsky said Amazon’s ads business is now big enough to merit its own disclosure and discussion.
Executives revealed that Amazon’s ads work best around major Amazon sales events such as Prime Day. What a beautiful self-fulfilling prophecy!
About Amazon Prime, the price of this package will increase, and we can blame JRR Tolkien. Execs Said Next Amazon Prime Video Show The Lord of the Rings: The Rings of Power is typical of the extra value Amazon has brought to the service over the years. Amazon reportedly spent $465 million to make the show, in addition to the $250 million it paid for the rights to do so. ®
