The tl;dr version is that Covid-19 is putting at best mildly upward pressure on AWS growth rate, with dramatic acceleration in some areas and significant drop-offs in others. But to think that any PaaS/IaaS vendor can see dramatic growth while a world-wide recession is getting underway is just silly.

Let’s kick off this discussion of AWS by focusing first on one of the few pieces of data out there, Microsoft published a blog entry that they had seen a 775% increase in cloud use, implying Azure, and then corrected that number to apply to the Teams service offering in Italy.

In that blog entry they provided a priority list should resources be in short supply. There have also been sporadic reports of resource shortages in Azure, but I don’t know how prevalent that has been or how it differs from normal. All Cloud providers will, from time to time, have temporary resource shortages as sudden demand changes for some particular combination of requirements. On AWS for example you could have an instance type which is plentiful in most Availability Zones (AZ) within a Region but not in one particular AZ. If you request that type in that specific AZ you will get an error, while if you don’t specify an AZ or pick another AZ there is no problem. As much as they try to avoid it, that is just business as usual (e.g., one AZ may be out of physical space so just can’t have as much capacity). In any case, the Azure blog and associated rumors set off a minor frenzy that Cloud providers, including AWS, were having trouble dealing with overwhelming demand coming out of the Covid-19 crisis.

Given AWS hasn’t said anything about business trends in light of Covid-19, “Cloud Economist” and overall awesome Cloud commentator Corey Quinn did the very rational thing and checked EC2 Spot prices. For those who don’t know about Spot, AWS makes its spare capacity available for temporary use at very low prices. Basically they auction it off. The downside is that it can be taken away from you with a 2 minute warning if they need the capacity for normal allocations. That lets AWS maintain a lot more spare capacity than would be economically viable if they couldn’t get some revenue for it. They have enough capacity that customers have demonstrated things like getting 1.1 MILLION vCPUs worth of EC2 Spot instances to run a natural language modelling job. What happens with Spot is that as demand goes up, either to dip deeply into spare capacity for normal EC2 use or because of more Spot demand itself, Spot prices rise. So checking Spot prices is one of the most obvious ways to see if EC2 is seeing demand beyond what AWS’ planning and supply chain can deliver. For one instance type in one region Corey found a modest uptick in pricing since the beginning of January. But I looked at other instance types, and in other regions (including two I know have physical expansion challenges) and found no price change since the start of the year. I even found older instance types that were now cheaper than 3 months ago. Corey confirmed that his broader look matched mine. So Spot pricing is telling us that (broadly speaking) AWS capacity is not being overwhelmed by changes in demand from Covid-19.

And why should it? Did Covid-19 cause any company to accelerate its move of SAP from on-premises to the Cloud? Did Restaurant chains suddenly up their need for Cloud services as they moved from full service to takeout only, or even ceased operation? What about retail in general? Yes, AWS hosts a lot of retailers (despite the competitive pressure from their parent being competitor Amazon) and, moreover, hosts a lot of services that restaurants and retailers utilize.  How many Square Readers are sitting idle in small retailers because the government has ordered those retailers to stay closed? Would you guess that Square has scaled up or down their use of AWS these last few weeks?

On the other hand, we know that AWS customers like Netflix, Zoom, and Slack are seeing unprecedented demand as people stay at home. Other work tools that run on AWS, such as those from Atlassian, are likely seeing expanded use. Software development is something that is widely done from home on a part-time basis in normal times, so it is continuing during the Covid-19 shutdown with even greater reliance on the Cloud. AWS hosts a lot of Dev/Test workloads. In fact, many companies that were reluctant to move production workloads to the cloud have been using it for Dev/Test for years. I know in my own company the Covid-19 stay-at-home change has lead a few developers who were using in-office development machines to move to AWS instances instead. Just as Microsoft has reported increased demand for Azure Virtual Desktops, I’m sure AWS has seen increased demand for Workspaces. Chime must be growing tremendously as well, and the other productivity services are likely seeing some acceleration. But the entire suite of productivity services is, unlike O365 for Microsoft or Gsuite for Google, likely immaterial to AWS’ results and thus at best is offsetting some shrinkage elsewhere.

AWS has other positives going for it, for example Gaming is one of its biggest vertical segments. Over the years most gaming companies have built their backends on AWS, so with all the usage growth in gaming that a Stay-at-Home lifestyle brings AWS is probably seeing incredible demand growth. Basically, anything home entertainment related is growing, and that is a real positive for AWS. Consumption of online news? Good for AWS. Web use in general? Excellent for AWS. Healthcare usage? Likely tremendous increase. Government usage? Increase. Companies that still do most of their brick and mortar IT on-premises, but use cloud services for their online presence? An area that AWS would see acceleration. Delivery services? Probably up, but has some perhaps surprising headwinds. Doordash probably way up, but Grubhub has a stronger focus on deliveries to businesses and that has evaporated. So are they up overall? Uber Eats up, Uber overall down. Basically B2C delivery(-like) services up, B2B down. I’m not sure how it nets out in terms of AWS usage.

Let’s cycle back to the negative. We are seeing a sudden and deep dip in economic activity, and that can’t be good for AWS in the short term. The bigger AWS has become, and the more it is the norm for organizations of all sizes and types to make use of AWS, the more exposed AWS is to the economic cycle. So it is very hard to imagine that overall its growth accelerates while the majority of customers are under such duress or even going out of business. My best guess is that for Q1 AWS benefited more from acceleration in areas like gaming and home entertainment than it was harmed by a general business slowdown. But for Q2 I think AWS can’t avoid having the overall global economic slowdown be reflected in its own numbers.

Now in the long term the Covid-19 crisis will lead to a net business positive for AWS. Companies will put in long-term strategies that support more distributed, at home, work.  Both as a normal part of business, and as a contingency for future disruption. The move to online business models will accelerate and new services emerge. Companies will accelerate movement away from their own data centers and services that are more fragile than the cloud providers. They will accelerate the replacement of legacy applications with cloud-native applications. Some companies will not survive, but the demand will return for the services they provided. The companies that emerge to provide those services will be “born in the cloud”, benefiting AWS in particular and Cloud providers in general. Areas that require tremendous computing resources, like the modeling for drug discovery, will see great expansion and drive a lot of AWS demand. Etc.

Bottom line here is don’t expect AWS to have significant resource shortages during Covid-19, in part because of great work AWS does in managing capacity, but also because demand from many customers will drop to offset the growth from others. And from a business  perspective, AWS growth will at best experience a modest uptick and the longer this goes the more likely it experiences an overall slowdown from its broad exposure to the economy.