Amazon extends the life of its servers to six years, expects $900m benefit in 90 days

Cloud optimization efforts ebb, and migrations resume has completed a "useful life study" for its servers and decided they can be used for an extra year – taking the working life from five to six years. It predicts the change will contribute $900 million to net income in Q1 of 2024 alone.

The change came into effect on January 1 and follows a 2022 decision to extend the lifespan of servers to five years.

News of the change came in Amazon's Q4 FY 2023 earnings call, during which it disclosed overall revenue of $170 billion – up fourteen percent compared to the previous year's Q4. AWS contributed $24.2 billion and grew and 13 percent year-over-year. The Amazonian cloud finished the year with $90.8 billion revenue – another thirteen percent jump.

"We're now approaching an annualized revenue run rate of $100 billion," enthused Amazon CEO Andy Jassy.

By way of comparison, Dell's most recent full year of revenue landed at $102 billion. And while AWS is a pure business-to-business play, Dell sells plenty of kit to consumers – meaning the cloud colossus is a bigger enterprise player than Dell. This year's $90.8 billion haul also means AWS is bigger than B2B peers HPE ($29.1 billion) and Cisco ($57 billion) combined.

Let that sink in … but know, too, that Microsoft's enterprise business is bigger still.*

Jassy predicted AI will bring "tens of billions of dollars of revenue over the next several years" but admitted that at present AI is not a big contributor to AWS revenue.

For now, he's pleased that AWS customers have mostly moved on from projects focused on cost optimization – a trend major clouds noticed in 2022 as customers tried to claw back their sprawling rented infrastructure fleets.

"As these optimizations slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations," Jassy explained. That swing brought $1.1 billion of additional quarter-on-quarter revenue to AWS.

That demand, and the need to build AI infrastructure, will see Amazon's capex soar.

FY 2023 capex was $48.4 billion, down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation.

CFO Brian Olsavsky told investors they can expect an increase in capex "primarily driven by increased infrastructure capex, support growth of our AWS business, including additional investments in generative AI and large language models." The CFO mentioned "region expansions" as one reason for the capex jump.

Among the other news nuggets revealed on Amazon's earnings call:

  • The debut of a canine chatbot named "Rufus" in Amazon's apps, to help with product searches and recommendations;
  • Amazon is on track to launch the first production satellite for its Kuiper space broadband project in the first half of 2024, and expects beta testing in the second half of the year;
  • Adding ads to Prime Video means Amazon will "be able to continue investing meaningfully in content over time."

Amazon's full year revenue was $574.8 billion, up 12 percent from 2022's $514 billion. Net income was $30.4 billion, a welcome change from 2022's $2.7 billion loss. ®

* It's hard to put a number to Microsoft's enterprise business. The software behemoth's Intelligent Cloud segment won $25.9 billion revenue last quarter, and plenty of the most of $19.2 billion earned by the Productivity and Business Processes segment came from commercial Office Customers and Dynamics. So it's bigger than AWS, but hard to say how by how much.

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