Amazon.com has for the first time opened up its cloud services division to public scrutiny, reporting that Amazon Web Services’ net sales increased 49% in the first quarter of 2015 while margins remained steady at 16.9%.
Amazon’s first breakout of AWS results fueled hopes that the company is headed toward profitability. The cloud business racked up $1.57 billion in first-quarter sales, with $265 million in profit (up slightly from $245 million for the same period last year). Amazon as a whole had a net loss of $57 million, or 12 cents a share.
Cloud “could be lucrative beyond hopes,” The Street’s Jim Cramer wrote. “In one fell swoop, it obliterated the long-term short story of how Amazon would never get profitable.”
Yahoo Finance said the cloud sales were about as expected, but the profits were a surprise. “Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating,” CEO Jeff Bezos said in a news release, referring to the unit’s annualized run rate.
Amazon stock closed up more than 14% at $445.17, reflecting not only the AWS results but also a second-quarter operating income forecast of as much as $650 million excluding the cost of stock-based compensation. That was much higher than most analysts had been assuming for what is typically a slow quarter for the company. Last year, Amazon reported a loss of $15 million in second-quarter operating income.
“Every few years, Amazon eases up a bit on its invest-everything-for-growth strategy and demonstrates just how profitable it can be,” Yahoo Finance said. “After the new second-quarter forecast, investors seem to believe 2015 will be a ‘show me the money’ kind of year.”
Amazon has consistently posted a net loss as it re-invests revenue back into the company. “The lack of profitability is a key concern for Amazon’s investors,” Forbes noted.
Photo: Steve Jurvetson, CC BY 2.0