AWS Growth Slows, But Amazon's Still Killing It in Cloud

Mitch Wagner
2/3/2017
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Amazon reported slowing growth for its AWS cloud business in its fourth quarter and fiscal 2016 on Thursday. Maybe that's bad news -- but most companies would love the kind of growth it delivered.

Amazon.com Inc. (Nasdaq: AMZN) reported net sales for AWS of $3.5 billion for the quarter ending December 31, up a hefty 47% from year-over-year, and annual sales of $12.2 bilion, up 55% year-over-year.

That growth rate is great. But it's less great than it was in the year-ago quarter, when quarterly revenues at Amazon Web Services Inc. were up 69% year-over-year quarterly and annual sales grew 70% for 2015.

Operating income for AWS was $926 million for the recent quarter, up from $540 million in the year-earlier period, and $3.1 billion for the year, up from $1.5 billion in 2015.

Overall, Amazon reported lower-than-expected revenues of $43.7 billion, but beat earnings-per-share expectations, delivering $1.54. Wall Street thought Amazon would deliver $44.68 billion in revenues with earnings per share of $1.35.

Amazon's stock was down 4.61% in after-hours trading on Thursday, at 4801.26.

During an earnings call on Thursday, Amazon CFO Brian Olsavsk said the company is "very happy with the response from customers" to the AWS cloud service. Customers represent a "broad base" and cross-section of the economy, he said.

To attract new customers, the company made seven price cuts in the fourth quarter.

"We've been pretty clear that this business is all about creating new functionality for customers, giving price cuts, and working on the operating experience," Olsavsk said.

"We're very pleased with the fourth quarter," he said. AWS rolled out more than 1,000 new services and features, versus 700 in the year-ago quarter, and highlighted marquee customers such as Capital One, Workday and Salesforce.


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Amazon is in hot competition with Microsoft, IBM and Google for cloud leadership, but AWS has a big advantage in market share. (See Amazon Bigger in IaaS Cloud Than Microsoft, Google & IBM Combined.)

The fourth quarter saw Amazon make efforts to enhance its public cloud service. In early December, it introduced Greengrass software and Snowball hardware, designed to extend AWS on to customer premises. (See Amazon Takes Cloud on the Road.)

Amazon also partnered with VMware to extend that company's private cloud infrastructure to the AWS public cloud. (See Enemies No More: Amazon & VMware Partner on Cloud.)

Also that month, Amazon and other hypercloud providers made new invested in artificial intelligence. (See Hypercloud Guys Make Big AI Push.)

The quarter kicked off with Amazon and AT&T forging a partnership on enterprise cloud, the Internet of Things and security. (See AT&T & AWS: A Powerful Combo and What's First for AWS & AT&T?)

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

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