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Amazon Web Services: $5B & 'Growing Fast'

Mitch Wagner
4/23/2015

Wall Street didn't get the email that it was supposed to punish Amazon if its cloud business turned out to be too successful.

Amazon.com Inc. (Nasdaq: AMZN) divulged the financial performance for AWS, the world's biggest cloud platform by far, for the first time on its earnings call Thursday. Sales were $1.566 billion, up 49% from $1.050 year-over-year. Expenses were $1.301 billion, up from $805 million, for $265 million income, up 8% from $245 million. Annual run rate is $5 billion, the company said in a statement. (See Amazon.com Announces Q1 Sales Up 15% to $22.72 Billion.)

"Amazon Web Services is a $5 billion business and still growing fast -- in fact it's accelerating," Jeff Bezos, founder and chief executive of Amazon.com, said in a statement.

Previous to the earnings report, analysts said Amazon needed to show a loss for AWS, lest strong results in AWS make Amazon's mainstay retail business look weak, which would cause Amazon's stock to drop. AWS accounts for 7% of Amazon revenue. (See Amazon Earnings: What to Watch For.)

That didn't happen. Amazon's stock traded at $415.5 up 6.54% in after-hours training.

Overall, net sales increased 15% to $22.72 billion in the first quarter, compared with $19.74 billion a year ago. Amazon was hurt by $1.3 billion unfavorable impact from year-over-year changes in foreign exchange rates -- excluding that, net sales increased 22% year-over-year.

Operating income was up 74% to $255 million, compared with $146 million in the year-ago quarter.


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Net loss was $57 million in the first quarter, or $0.12 per diluted share, compared with net income of $108 million or $0.23 per diluted share in the first quarter of 2014.

Amazon beat expectations slightly -- analysts expected Amazon to lose $0.13 per share, on revenue of $22.39 billion.

For the second quarter, Amazon expects net sales between $20.6 billion and $22.8 billion, up 7% to 18% year-over-year, with an operating loss of $500 million to a gain of $50 million, compared with a $15 million loss a year ago.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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brooks7
brooks7
4/28/2015 | 10:12:33 AM
Re: Numbers
Amazon has the huge advantage that they are doing this for Amazon.com.  They are essentially opening this up to 3rd parties.  Which means they are writing a lot of software and productizing it.

That is what makes AWS different.

seven

 
kq4ym
kq4ym
4/27/2015 | 6:42:16 PM
Re: Numbers
Amazon certainly played it's cards right years ago when it began the web services end of the business. With sales of $1.566 billion, up 49%, that's nothng to complain about even if expenses rose and the retail end didn't show such nice gains.
Mitch Wagner
Mitch Wagner
4/27/2015 | 6:39:09 PM
Re: Numbers
danielcawry - Amazon is so far ahead of the competition here that the competitors are the ones who have to differentiate from Amazon, not the other way around. 

Microsoft and IBM at least are trying to differentiate by offering enterprise integration. 
danielcawrey
danielcawrey
4/27/2015 | 12:27:13 PM
Numbers
These are good numbers – growth is accelerating. The only problem is that there are a lot of competitors in this market.

I would be bullish on this line of business for Amazon were it not for Microsoft, Google and Digital Ocean all vying for the same customers. What makes Amazon the differentiator in this business? I'm not totally sure. 
Joe Stanganelli
Joe Stanganelli
4/26/2015 | 11:11:01 PM
Uncertainty
Naturally, new developments and business upheavals can bring about uncertainty, but I think we're *well* past the point of Amazon's cloud success causing substantial uncertainty in the markets it participates in (particularly given how small a portion AWS makes up of Amazon's business).
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