The Cloud

Amazon Shrugs Off Cloud-Computing Rivals

Amazon Web Services, with $890 million in operating income, accounted for most of the company's overall profit and its sales rose 43% to $3.7 billion.
Matthew HellerApril 28, 2017
Amazon Shrugs Off Cloud-Computing Rivals

Powered by its cloud computing business, Amazon is continuing to defy expectations that increasing competition will slow its momentum.

For the first quarter, which ended March 31, the online shopping giant reported net income rose 41% to $724 million, or $1.48 per share — the eighth straight quarter that it posted a net profit. Analysts on average were expecting $1.12 per share.

Net sales rose 23% to $35.7 billion, just beating analysts’ average estimate of $35.3 billion.

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Amazon said the $890 million in operating income from its Amazon Web Services cloud business accounted for most of its overall profit. “The unit is way more profitable than Amazon’s core retail business — there are no physical products to buy, store and ship in AWS — and growing rapidly,” Recode noted.

“While its growth is decelerating, its revenue still grew 43 percent year over year to $3.7 billion,” it added. “That helps the bottom line a lot.”

According to Reuters, the first-quarter results may ease some investors’ fears that “mounting competition from rival cloud providers like Microsoft and price cuts at AWS would slow the company’s momentum. Many also expected Amazon’s staggering array of investments — from new warehouses, TV and movie production to research on artificial intelligence — to weigh on profits.”

“The core e-commerce segment remains very healthy,” said Colin Sebastian, an analyst at Baird Equity Research. “Subscription services and advertising are growing much faster, and beginning to move the needle, which also helps increase profit margins.”

Amazon Prime helped raise Amazon’s first-quarter subscription sales 49% from a year earlier to $1.9 billion. “Sign-ups have been key to Amazon’s strategy because Prime encourages shoppers to buy more goods, more often,” Reuters said.

Revenue from a co-branded credit card deal and from third-party sellers paying to promote their products on also rose 56% to $850 million.

In after-hours trading Thursday, Amazon’s shares rose 3.9% to $954. “There’s always this moment when people think, ‘Is the magic going to run out?’” said James McQuivey, an analyst at Forrester Research. “It just hasn’t panned out.”