Amazon Sees Good Times, Thanks To AWS
Amazon has produced excellent earnings due to the rapid growth of AWS.
Amazon recently joined Facebook as a rare bright spot in a tech sector that has lately produced a number of unsatisfactory earnings reports. Helped by its rapidly growing Amazon Web Services (A.W.S) business, the American ecommerce organization had its most profitable 3 months in almost 22 years. The online retailer frequently flip-flops between showing losses and profits, relying on how strictly it takes the decision to invest funds into huge new business bets.
Investors have granted much more liberty to Amazon to do so than the rest of tech organizations of its magnitude often receive, due to its record of growing at a huge rate. For the initial quarter, ending in March 31, the company reported a net income of $1.07 per share or $513 million, up from a loss of $0.12 per share or $57 million, during the same time a year ago.
Revenue earned by the organization grew from $22.72 billion to $29.13 billion in just 12 months. Its share price grew by over 12% in trading after the closure of the stock market following the release of results. Investors were glad to find the company showing profits following the release of reports from Intel, Microsoft, Google and Apple. “The fact that they’re profitable is a big deal. It’s more of a big deal after some of the disappointing numbers from Apple and others,” Amplify Investments CEO Christian Magoon said.
Amplify Investment is a fund manager, which counts Amazon as a top holding. The results had surpassed analysts’ average estimates surveyed by Thomas Reuters for sales revenue of $27.98 billion and earnings of 58 cents per share.
“I saw the number, and I thought, ‘O.K., did I read this wrong?’” Mr. Magoon added. “The beat was big. On the income side, it was fantastic.” The largest source of the profits for the company is its cloud computation business (AWS) that started over 10 years ago and is currently on track to earn over a sum of $10 billion annually in revenue.
AWS is a very renowned cloud facility for a rising number of huge companies and startups that are interested in renting computation capability, instead of running their own software and hardware. Cloud computation is a lot more profitable than Amazon’s retail business of the North American region, which earns thinner profit margins, and its global retail business, which makes losses.
AWS operating income has increased in the 3 months to a sum of $604 million. Profits earned by AWS contributed 56% of the cumulative operating income of Amazon, even though AWS earned revenue of $2.57 billion — up 64% from 2015 — amounted to less than 9% of total revenue.