The Hidden Costs Of AWS Lambda

AWS Lambda can often save you time and effort when building on the server side.

With no servers to manage, effortless scaling and reduced costs, it’s hard to ignore it.

That’s what one engineering team believed when they migrated a critical microservice from EC2 to Lambda.

Their expectations were to reduce infrastructure costs by 60%: fueled by AWS’s Cost calculator and the appeal of paying only for what they used.

But six months in, the numbers told a different story.

Instead of saving money, they found they were paying more than they did on EC2, even though their workload remained unchanged. They had underestimated just how complex the cost dynamics really were.

Here are the hidden costs they “wish” they knew earlier.

1. Cold Starts = Hidden Compute Time

AWS bills for Lambda from the moment a function starts initializing, not just when it executes business logic.

This means that every time a cold start occurs, you pay for the time it takes to load libraries, initialize database connections, and import dependencies.

In this team’s case, their average execution time was 500ms, but cold starts added 800ms on top of that. Roughly 15% of invocations experienced cold starts, inflating compute costs by around 10%.

2. The API Gateway Tax

Most serverless architectures use API Gateway to expose Lambda functions as HTTP endpoints. It’s easy to overlook, but API Gateway pricing can eclipse Lambda itself.

In this team’s case:

• Lambda compute + requests: ~$43/month

• API Gateway (requests + data transfer): ~$248/month

Over 75% of their serverless bill came from API Gateway alone. High request volume, large response sizes, and per-GB data transfer fees quickly added up.

3. Database connections don’t scale easily

With EC2, a shared connection pool handles all incoming requests.

With Lambda, each concurrent invocation spun up its own connection. This created pressure on the team’s RDS instance.

They then had to upgrade from a db.r5.large to a db.r5.2xlarge just to support the connection volume, adding $340/month in database costs.

4. Monitoring Costs Exploded

CloudWatch seemed like a simple logging solution, until it wasn’t.

Once they factored in log ingestion, metric tracking, dashboards, and alerting, their observability stack exploded to $140+/month. That’s nearly 30% of their total serverless bill, and over 3x what they spent monitoring EC2.

5. Data transfers add up fast

Serverless apps tend to be more distributed, and that means more network traffic; function-to-function calls, cross-service interactions, and external APIs.

Their outbound data transfer went up by 35%, leading to nearly $90/month in additional charges.

These were costs the team never considered during planning.

The Bottom Line

AWS Lambda is powerful, but the real cost concern extends far beyond invocation prices.

Cold starts, API Gateway, database scaling, observability, and data transfer can all add significant, often unexpected, expenses.

Before you commit to serverless functions, take time to model your entire architecture, not just the functions themselves.

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Reference

1. “The Hidden Costs of Serverless: What AWS Lambda Documentation Doesn’t Tell You”. Coders Stop. May 02, 2025. https://aws.plainenglish.io/the-hidden-costs-of-serverless-what-aws-lambda-documentation-doesnt-tell-you-4c6afadd4678

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