Amazon has reported $21.4 billion in net sales for its Cloud arm Amazon Web Services (AWS) — up 20 percent year-over-year — in its fourth quarter that ended December 21.

With this, AWS now represents an annualized sales run rate of more than $85 billion.

“Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions,” said Brian Olsavsky, Chief Financial Officer at Amazon.

These optimisation efforts continued into the fourth quarter.

“Some of the key benefits of being in the cloud compared to managing your own data center are the ability to handle large demand swings and to optimize costs relatively quickly, especially during times of economic uncertainty. Our customers are looking for ways to save money, and we spend a lot of our time trying to help them do so,” Olsavsky said during the company’s earnings call with analysts.

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Amazon CEO Andy Jassy said that 90 percent to 95 percent of the global IT spend remains on-premises.

“If you believe that, that equation is going to shift and flip. I don’t think on-premises will ever go away, but I really do believe in the next 10 to 15 years that most of it will be in the cloud if we continue to have the best customer experience, which we have to work really hard at an event which we’re working to do. It means we have a lot of growth in front of us in the AWS business,” Jassy said.

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“This customer focus is in our DNA and informs how we think about our customer relationships and how we will partner with them for the long term. As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters,” he added.