Why Amazon's once-dominant cloud unit is ailing

It’s no exaggeration to say Amazon.com Inc. invented the cloud business.

- BY MATT DAY

AWS says it “remains the leader in cloud.” Above, Amazon’s Seattle headquarters.

(JOVELLE TAMAYO Washington Post)

Amazon Web Services took the corporate data center apart and split it into pieces, building pay-as-you go services delivered with remarkable speed and consistency. The effort brushed aside incumbents, transformed an internal startup into Amazon's profit engine and gave executives in Seattle the power to dictate terms to much of the industry.

Now, suddenly, AWS is struggling. Last week, Amazon's cloud unit suffered one of the worst outages in its history, taking down its most important cluster of data centers and disrupting the operations of hundreds of companies and consumer apps. Trading platforms, digital curricula for students, online utility payments for Seattle, Amazon's hometown, were all disrupted. The event dragged on for about 15 hours before AWS managed to get all of its services back online.

Then on Thursday, confirming a Bloomberg report, Alphabet Inc.'s Google said it will supply up to 1 million of its specialized artificial intelligence chips to Anthropic PBC. The deal deepens Google’s partnership with the fast-growing AI startup and represents a blow to Amazon, which has invested billions in Anthropic.

Three years into an AI boom spawned by OpenAI's revolutionary ChatGPT, AWS is widely perceived as trailing its tech peers in AI. While AWS remains the cloud market leader, Microsoft Corp. is now growing its backlog of corporate sales faster than Amazon, a trend that recently favored AWS. Last year, according to a Gartner Inc. estimate, Amazon's cloud division captured 38% of corporate spending on cloud infrastructure services. That sounds hefty until you consider that Amazon's cloud division held almost half of that market as recently as 2018, according to the firm.