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Amazon says 40% of CapEx going to AWS – trims $1 billion by extending server life

AWS continues to be the goose that lays the golden egg for Amazon, adding more revenue year-over-year than any quarter in its history in Q4: It’s now a $71 billion run rate business, up from $51 billion last year.

The news came as Amazon reported full-year sales of $469 billion in 2021 (net income was $33.4 billion).

The company boasted customer wins for the quarter that included Nasdaq, which plans to migrate its markets including its matching engine to the cloud. (This is the core technology at the heart of an exchange that facilitates price discovery and matching of buy and sell orders and maintains order books for the assets traded.)

Detailing capital expenditure plans, Amazon’s CFO Brian Olsavsky acknowledged for the first time that AWS accounts for just under 40% of Amazon’s entire capex, noting that “Amazon is a large customer of that as well as we build and structure for ourselves directly or through AWS” (having moved off its Oracle databases in 2019.)

Some 30% of capex meanwhile is for building warehouses, “just under 25%” is transportation capacity.

See also: AWS pokes MSFT in the eye with a free SQL Server > PostgreSQL migration tool

He added that the public cloud juggernaut planned to get more life out of servers and networking kit: “We’re prospectively updating the useful life of our servers and networking equipment, beginning in January… we monitor and review the useful lives of our depreciable assets on a regular basis to make sure that our financial statements reflect our best estimate of how long the assets are going to be used in operations. We are increasing the useful life for servers from four years to five years and network equipment from five years to six years.”

That will save it approximately $1 billion a year, Amazon said in its earnings report.

That was no reflection on supply chain tightness, he suggested, as analysts pressed Amazon on supply chain impact on its earnings call late Thursday February 3: “We did a lot to combat the supply chain issues we saw in Q4 or anticipated in Q4” Olsavsky said. “We bottled product ahead. We work with vendors to secure inventory early, in some cases, paid earlier, which had a working capital impact. We also worked very hard to open up… existing channels of input into the country, whether it was port capacity or vessel capacity. So, we did everything we knew how to as far as trying to get more capacity in a constrained market. And we think it worked for our customers in Q4.

“I wouldn’t say we’ve totally passed that, but we don’t expect it to be a big issue in Q1.”

AWS has 84 availability zones in 26 regions around the world currently. It has previously announced plans to launch 24 more zones in eight more regions “in the next couple of years” executives reiterated.

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