AWS Sales Still Impress Even With Small Slowdown

Scott Ferguson
4/27/2017

Amazon continued to wow Wall Street with its earnings, even as the retail giant's vaunted Amazon Web Services cloud division saw its sales slow a bit again during the first quarter of 2017.

On April 27, Amazon released its first quarter results, which saw overall revenue hit $35.7 billion during the first three months of the year. This compares to the $29.1 billion the company saw during the same period in 2016. At the same time, Amazon posted non-GAAP earnings per share of $1.48 versus $1.07 per share a year ago.

Analysts were looking for revenue of $35.3 billion and earnings per share of $1.13. The company's stock shot up nearly 5% after hours.

However, it's AWS that many are looking at, asking if the company could maintain its phenomenal growth. The answer is a little mixed.

For the third quarter, which ended March 31, AWS pulled in $3.66 billion in sales. That's a 43% increase from 2016, when AWS recorded sales of $2.56 billion. These numbers were in line with what Wall Street had expected.

While for some companies this would represent fanatical growth, it's slower than previous AWS quarterly reports. For instance, in the fourth quarter of 2015, AWS posted growth of nearly 70%. Throughout most of 2016, AWS posted growth number above 50%, only dipping down to 47% in the last quarter of the year. (See AWS Growth Slows, But Amazon's Still Killing It in Cloud.)

Cash delivery.  (Source: Jose Miguels via Pixabay)
Cash delivery.
(Source: Jose Miguels via Pixabay)

During the first quarter, AWS also recorded operating expenses of $2.77 billion and operating income of $890 million.


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If there was concern within Amazon, it didn't show.

In a call with analysts on Thursday, CFO Brian Olsavsky said AWS will have a $14 billion run rate this year, and he pointed to the 1,000 features added to the platform in 2016 as a sign of the innovation going into the cloud. He also noted the 23,000 database migrations done with AWS tools, as well as new customers such as Snap Inc. and Liberty Mutual. (See Snap Commits $1B to AWS.)

"We are very happy with business and with the team, and for us, innovation is going to be key going forward," Olsavsky said.

AWS remains the go-to choice for public infrastructure-as-a-service (IaaS), but it's finding increased competition from Microsoft Azure, as well as Google, which has bolstered its public cloud offerings and customer base over the last 18 months. (See AWS Tops in Public Cloud, but Azure Is Catching Up.)

Even though AWS may have seen sales slip in the past few months, its leadership was still rewarded. The chief of the cloud division, Andy Jassy, pulled in a pay package of more than $35 million for his efforts. (See Amazon's Cloud Honcho Gets Way More Pay Than His Boss.)

Earlier this month, Jassy and CTO Werner Vogels unveiled several new features for AWS, including a new software-as-a-service (SaaS) subscription program and an application development tool called CodeStar, which will keep developers busy for the next several months to come. (See AWS CTO Unleashes Torrent of Developer Features.)

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— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.

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kq4ym
kq4ym
5/14/2017 | 5:43:33 PM
Re: Far from saturated
Even with some softening of earnings and sales, I don't see any problem with Amazon's growth...it's still a great acheivement to get those numbers. And apparently they think so too as "Andy Jassy, pulled in a pay package of more than $35 million." I can't say anyone should be worth that much money, but then again, i wouldn't refuse that if I were in those big shoes.
Scott_Ferguson
Scott_Ferguson
5/1/2017 | 11:35:30 AM
Re: Far from saturated
@Joe: All very fair points there. I don't know enough about how the internal workings of AWS goes to say for sure. From a coverage point of view, they have a very controlled message. 
Joe Stanganelli
Joe Stanganelli
5/1/2017 | 7:48:58 AM
Re: Far from saturated
@Scott: I was speaking more in terms of the impetus for AWS to begin with.

That said, I've no idea, but Bezos does have a reputation among his critics as very my-way-or-the-highway, so I wouldn't be especially surprised to know that he is directly involved in such things -- at least, on particular matters.
Scott_Ferguson
Scott_Ferguson
4/30/2017 | 9:31:57 PM
Re: Far from saturated
@Joe: Is it Bezos in this case of the guys like Jassy and others who are running the AWS side of the coin. I'd be intersted in seeing who make a lot of the decisions there behind the scenses. Is it Bezos or does he let these guys run the show?
Scott_Ferguson
Scott_Ferguson
4/30/2017 | 9:30:51 PM
Re: Far from saturated
@John: I think you have it very right there. I think this is just the beginning of what will be a larger and larger market as we go on.
Joe Stanganelli
Joe Stanganelli
4/30/2017 | 10:41:18 AM
Re: Far from saturated
@maryam: I think it just goes to show how adaptable and forward-thinking a CEO Jeff Bezos is.  Years ago, he saw the problem of shrinking margins...and what to do with all off those servers...

And so AWS was born.  Pivoting is not merely important to business (esp. the tech sector) today, but essential.
maryam@impact
[email protected]
4/28/2017 | 11:23:33 AM
Re: Far from saturated
Amazon has done a great job in transforming itself from just a web store to a tech provider for B2B and B2C consumers. It creates the stickiness that keeps its customers long term even as competition grows. If it continues to focus on innovation I have no doubt it will maintain its edge.
JohnMason
JohnMason
4/28/2017 | 8:11:08 AM
Far from saturated
Most people, I believe, would agree that the market for cloud services is far from saturated. That alone means there should be continued growth for the industry, not just for Amazon. If the cloud services represent more efficient ways of doing business, then the growth should continue even if the economy in general hiccups.
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