Andy Jassy sets out Amazon's strategy for year ahead

'Customers have appreciated this customer-focused, long-term approach'

The AWS support team is now spending most of its time helping customers optimise their customers' clouds, as businesses are becoming more careful with their spending in the challenging global economy.

In his annual letter to shareholders released on Thursday, Amazon CEO Andy Jassy explained that AWS's goal now is not to optimise for any specific quarter or year, but to establish lasting customer relationships and build a business that "outlasts all of us."

"Customers have appreciated this customer-focused, long-term approach, and we think it'll bode well for both customers and AWS."

Jassy said "numerous" AWS customers have told the company that they are not solely focused on cost-cutting, but are instead prioritising cost optimisation. This approach allows businesses to allocate resources towards developing innovative and novel customer experiences.

"While these short-term headwinds soften our growth rate, we like a lot of the fundamentals that we're seeing in AWS. Our new customer pipeline is robust, as are our active migrations," Jassy wrote.

"Many companies use discontinuous periods like this to step back and determine what they strategically want to change."

AWS achieved a 29% year-over-year growth rate in 2022, based on a revenue base of $62 billion, Jassy said.

Jassy characterised 2022 as one of the more challenging macroeconomic years in recent history. He also outlined the measures Amazon had implemented to cut costs, including the closure of its Amazon Care healthcare initiative and some retail locations across the US.

Despite the cost-cutting and turbulent circumstances, Jassy said Amazon's best days are "in front of us."

"We took a deep look across the company, business by business, invention by invention, and asked ourselves whether we had conviction about each initiative's long-term potential to drive enough revenue, operating income, free cash flow, and return on invested capital.

"In some cases, it led to us shuttering certain businesses."

AWS continues chip and AI investments

Jassy affirmed that AWS's innovation on its general-purpose CPU Graviton, including the recent introduction of its Graviton3 chips and its new training chip Trainium, is ongoing.

He highlighted the company's recently unveiled Inferentia2 chip, said to deliver up to 4x higher throughput and 10x lower latency than its predecessor.

Jassy also talked about Amazon's investments in AI tools, particularly in the area of generative AI, which has gained momentum in the last six-eight months.

Emerging AI technologies, said Jassy, have the potential to revolutionise every aspect of the customer experience. Amazon will continue to allocate "substantial" resources to develop these models for its consumer, seller, brand and creator experiences.

Apart from the e-commerce and cloud segments, Amazon is exploring growth opportunities in several other markets.

In his shareholder letter, Jassy specifically mentioned the company's advertising unit, which generated $11.6 billion in revenue in the last quarter.

He also said Amazon is investing in new machine learning software to enhance ad targeting.

"We also see future opportunities to thoughtfully integrate advertising into our video, live sports, audio, and grocery products," Jassy added.