Service Provider Cloud

Amazon AWS Reports $2.6B Quarterly Revenue, Up a Colossal 64%

Amazon Web Services is on track for a $10 billion run rate, clocking in Thursday with $2.6 billion quarterly revenue, up 64% year-over-year and $8.9 billion trailing 12 months of sales.

In other words, AWS is growing faster than a Happy Deals Giant Inflatable Pickle ($5.25 on Amazon).

Amazon.com Inc. (Nasdaq: AMZN) is also "very pleased" with a broad, 23.5% operating margin, nearly double the 12.4% year-ago margin, CFO Brian Olsavsky said on the Amazon quarterly earnings call Thursday. He cautioned, however, that the margin is likely to fluctuate significantly quarter to quarter. "Margins will be very bumpy and based on levels of investment, price reduction, and operating efficiency," Olsavsky said.

AWS Results
Source: Amazon
Source: Amazon

AWS is now in 33 availability zones in 12 geographic regions, with 11 more availability zones to come in the next year, and additional capital investments as well. The largest increase in capital will support incremental increased usage for current customers.

Cloud is helping drive growth for Amazon and other vendors this quarter. Microsoft Corp. (Nasdaq: MSFT)'s "intelligent cloud" business, which includes Azure and its traditional service products, grew 3.3%, to $6.1 billion. (See Microsoft: Cloud Growth Fails to Offset Overall Revenue Decline.)

Microsoft's cloud business is barely growing at all compared with Amazon's. But it's growing.

At IBM, cloud is one of several high-growth business lines, although overall revenue for the company has declined 16 straight quarters. (See Cloud Pays for IBM, But Not Enough for Wall Street.)

VMware is also looking at cloud driving revenue up as its core business slumps. (See Cloud Helps Drive VMware Revenue Higher.)

Find out more about enterprise cloud at our upcoming Big Communications Event in Austin, Texas, May 24-25. Register now!

And Apple's cloud businesses shone as the rest of its business declined -- the first quarterly revenue decrease in 13 years. (See Apple: Cloud Shines Light in Financial Gloom.)

Unlike those other companies, Amazon's core business is doing fine. Sales for the quarter were $29.13 billion, up 28% from a year ago, beating Amazon's own expectations. And the profit was $513 million, or $1.07 per share, compared with a year-ago loss of $57 million, or 12 cents per share. It seems Amazon sells a lot of Happy Deals Giant Inflatable Pickles.

Amazon stock soared in after-hours trading, up 12.48% to $677.11.

Amazon Net Sales (Overall)
Source: Amazon
Source: Amazon

Amazon Net Income (Overall)
Source: Amazon
Source: Amazon

Amazon is continuing its dominance of the cloud market, with even big players like Microsoft, Google and IBM struggling to keep up with Amazon's market share. This quarter's results will make it difficult for the insurgents to narrow Amazon's lead.

— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, West Coast Bureau Chief, Light Reading.

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Joe Stanganelli 5/5/2016 | 7:47:02 AM
Re: The Struggle Thus the support of platform-specific apps and building out a good platform.

It's why the the iPod defeated the Zune, why Google+ and Diaspora did not take down Facebook like so many boasted they would, and why Amazon's internal processes are so well developed.

We live in an app economy, to be sure, but those apps need platforms, and those platforms need apps.  Build out a good platform that encourages developers to stick with it and rewards them and you're golden.
Mitch Wagner 5/3/2016 | 1:11:12 PM
Re: The Struggle seven & Dennis - You're both right. 

The cloud has been around for a decade, but it's evolving. The IaaS and PaaS maket may be largely settled, but services are still emerging. AI in the cloud is the new hotness. 

Of course, AI may be an area where carriers are less able to compete than they can with basic IaaS and PaaS. As the value climbs higher in the stack, carriers will find it more difficult to climb with it. 
Mitch Wagner 5/3/2016 | 1:09:08 PM
Re: The Struggle seven - At this point I see it as more likely that a hypercloud provider would buy a carrier, rather than vice-versa. 

The opportunity for carriers is to provide connectivity between enterprises and cloud providers. 

I wonder how much of this underlies carrier resistance to net neutrality regulations. It isn't just that carriers want to charge Netflix for access to consumers. Carriers also want to be able to charge Amazon for access to enterprises. 
Mitch Wagner 5/3/2016 | 1:06:18 PM
Re: Emerging or Getting crowded? bosco_pcs - Microsoft has wisely chosen not to compete head-to-head with Amazon. Microsoft is going after the hybrid cloud market. 
brooks7 5/2/2016 | 11:41:36 AM
Re: The Struggle Joe,

But that is the exact point of the problem here...and by here I mean Lightreading.  The Carriers are massive firms that have to methodically deploy capital and do so efficiently.  They have to offer services that scale and do so reliably.  This whole notion that they will be nimble to the degree that the SOMA Software companies are is simply wrong.  By the time an idea has floated to the top and been considered for funding, there are 10 companies doing it already on a shoestring budget. 8 of those 10 will fail and 1 or 2 more will join.  

I keep saying that the value is in the applications here.  And yet we have initiative after initiative to "make services in the network".  And ALL of them fail.  Why do they fail?  Because the way applications are made is designed to make the network irrelevant.  You can get your service from ANYONE and Gmail works.  

But what happens in equipment marketing departments is that they listen to the carriers who express a desire for a kind of equipment or software to make their network special.  This flows down from executives at the carriers because that is what an MBA tells them would be the best thing for the business (even a little incremental margin per line is a big number).  So equipment companies do their thing and make these products and they go nowhere.  Where is IMS?  Why are we spending years on NFV standards (when Amazon clearly exists at a scale that means that this is a solved problem)?  

It is what I call "provider bias".  But because we a number of insiders we keep listening, while the world has gone another direction.  Seems like we are making the best vacuum tubes this side of the Soviet Union.

It doesn't mean that there are not new products or new technologies.  It just means that you should assume that things will continue to commoditize and quit investing in things that will never happen.


Joe Stanganelli 5/2/2016 | 11:03:13 AM
Re: The Struggle @brooks: Of course, the carriers are much newer to this sort of space and this technology, I would tend to think, than the West Coast technology companies and their hordes of extremely well pedigreed software and hardware engineers.  On the one hand, we should have seen this coming.  On the other hand, hindsight is 20/20.
brooks7 5/2/2016 | 9:59:34 AM
Re: The Struggle  


The thing about early markets and where I think we disagree is around disruption.  To me your comment about early stage means that there is the notion of dramatically shifting market shares as a possibility.   I think we are well past that and are in a stable-ish market share phase of a growing business.

To enter organically and be able to change things would mean a development program of say $1B.  From the start to say 5 years from now, the major players will have spent that much on software product development.  3rd party advances work for everyone, albeit they will allow newer players to skip some of that development.

So what carrier is about to hire call it 10,000 software engineers to write software for this?  

That is why I think the only rational path is inorganic.


mendyk 5/1/2016 | 4:34:44 PM
Re: The Struggle This market will grow exponentially over the next decade. So from a revenue point of view, it is early stages. There is plenty of opportunity for companies that have the will to fight for a part of this business. As you suggest, entry through acquisition is an option. What's disappointing is to see eight-figure executives decide that it's too hard to compete in this sector.
brooks7 5/1/2016 | 4:17:09 PM
Re: The Struggle Dennis,

I completely disagree with your assessment that this is early stages.  Early stages were 10 years ago.  We are in a 2nd or 3rd gen market now.

It IS early days for the CSPs who are still defining their 1st gen thinking.


mendyk 5/1/2016 | 3:18:39 PM
Re: The Struggle CSPs have been smoked in the early stages of cloud, but this part of the economy is still in its formative stages, which means CSPs still have a chance to make this a big part of their strategy. Some are taking steps in that direction, but it is surprising -- and not in a good way -- that there are some big CSPs that don't have the organizational will to compete in this area.
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