Amazon expects $900M+ per quarter from extending server life

Amazon has extended the useful life of the servers supporting its AWS cloud from five to six years, in a move that is expected to contribute almost an additional $1 billion per quarter to the vendor’s income.

The move, announced in the cloud provider’s fourth quarter 2023 results on Thursday, February 1, will further boost operating income for its AWS business, which rose from $5.2 billion in Q4 2022 to $7.2 billion in Q4 2023, and from $22.8 billion to $24.6 billion for the full year 2023.

Like many others, Amazon used to cut off the useful lifespan of a server at three years, but began extending that in 2020. Others followed suit, and cloud rivals Google and Microsoft both recently extended their useful server lifespan to six years. Amazon had already extended the useful life of networking equipment to six years in 2022, citing software advances helping hardware operate more efficiently. 

The extension to six years, which became effective in January, is expected to contribute $909 million to the company’s bottom line in the first quarter of 2024. That impact comes about because lengthening a server’s lifespan also lengthens the period over which Amazon can depreciate the cost of the hardware. A longer life/depreciation period translates to lower depreciation expenses every month, which in turn lowers the costs against income and results in higher profits.

Some sources have warned that firms with a limited cloud presence, using, say, a single virtual machine running on a legacy server, could experience catastrophic disruption if that server fails—especially as new tools like AI demand more compute resources. However, Steve Moreton, global head of product management at UK-based IT consultancy CJC, noted last year that providers and clients with good observability tools can monitor usage and the performance of hardware, allowing them to make adjustments before failures occur.        

Another bottom-line benefit of extending server life, said Steven Roe, CEO of West Highland Support Services, in the same article, is saving on the cost and resources associated with large “lift-and-shift” hardware replacement projects, and how the resulting changes in supply chain can also benefit a company’s carbon footprint—though replacing existing hardware with drastically more energy-efficient machines could also yield positive results for cloud providers.

(For more coverage of recent server life extensions—and the perceived perils of doing so—read our recent article here.)