Amazon stretches working life of its servers an extra year, for AWS and its own ops
Cloud colossus accounts for lion's share of Amazonian profits
Updated Amazon will run its servers and networking kit for an extra year – for both its own operations and for Amazon Web Services – and expects to save a billion dollars next quarter as a result.
"We're prospectively updating the useful life of our servers and networking equipment, beginning in January," CFO Brian Olsavsky told investors on Amazon.com's earnings call for Q4 2021 and FY 2021.
"We've been operating at scale for over 15 years, and we continue to refine our software to run more efficiently on the hardware," the CFO enthused. "This then lowers stress on the hardware and extends the useful life, both for the assets that we use to support AWS's external customers as well as those used to support our own internal Amazon businesses."
Amazon and AWS will therefore consider servers have a useful life of five years and networking kit can run for six. Both figures add a year to previous performance expectations.
We continue to refine our software to run more efficiently … this lowers stress on the hardware and extends its useful life
Olsavsky told investors the decision will mean Amazon.com's depreciation expenses will fall by $1 billion next quarter, although that figure will become smaller 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 extra year and booked $2.6 billion of depreciation savings as a result.
AWS continued to grow strongly. Q4 revenue of $17.8 billion saw the cloudy concern finish 2021 with receipts of $62.2 billion – 38 per cent higher than its FY 2020 haul of $45.4billion. The 2021 total means AWS is now larger, 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 this time last year.
Olsavsky attributed AWS's growth to increasing the size of its sales force and extra marketing. The CFO also said the market has stabilized, with customers whose spending plunged in early 2020 now spending again. Supply chain issues aren't expected to hinder growth, he added.
The results announcement showed how important AWS has become to Amazon, in terms of generating income. For 2021 the entire Amazon business won revenue of $469.8 billion, which delivered operating income of $24.9 billion. AWS alone accounted for $18.5 billion of that.
Do the math: $407 billion of Amazon.com business brought $6.4 billion of operating income, and the $62.2 billion of AWS revenue delivered the rest.
Congratulations, AWS users: you made this possible.
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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 of it across FY 2021. That's still a long way behind Facebook's FY21 ad revenue of $115 billion or even the $61 billion Google scored through ads in Q4 2021 alone. But Olsavsky said the Amazon ads biz is now big enough that it deserves its own disclosure and discussion.
Execs revealed that Amazon's ads do best around Amazon's big sales events such as Prime Day. What a lovely self-fulfilling prophecy!
On the subject of Amazon Prime, the price of that package will rise, and we can blame J.R.R Tolkien. Execs said the forthcoming Amazon Prime Video show Lord of The Rings: The Rings of Power is typical of the extra value Amazon has packed into the service over the years. Amazon reportedly spent $465 million to make the show, on top of the $250 million it paid for rights to do so. ®
Updated to add at 0300 UTC, February 8
Amazon's 2021 annual report contains a mention of a previous decision to extend the life of the company's kit, from three to four years, from 2020. That decision was mentioned in the company's 2019 annual report. The new extension is therefore the second in just two years, perhaps meaning kit acquired in 2017 will still be available on AWS this year.