AWS profitability quadruples as revenue surges 78%

posted in: Uncategorized | 0

Business Cloud News

amazon awsAmazon Web Services’ revenue grew by 78% year over year to $2.1 billion in the third quarter of 2015 and its operating profit more than quadrupled to $521 million. Its high profits – attributed to 500 new inventions and eight price cuts – contributed to earnings which surpassed analyst expectations and created a surge in parent company Amazon’s stock price.

The high growth rate in AWS profitability could be accounted for by last year’s low margins caused by a competitive price cuts on AWS services.

Meanwhile parent company Amazon reported an overall third-quarter operating profit of $406 million on $25.4 billion of sales. Amazon CFO Brian Olsavsky answered criticism that AWS is keeping the company profitable and that, in the face of cloud competition, it may have to cut prices again to ensure further growth.

“I will point out that this quarter showed a lot of innovation, a lot of new products and features and a lot of investment,” Amazon CFO Brian Olsavsky told analysts. “Globally we are investing very heavily in our Prime platform. We’ve launched multiple devices including e-readers, tablets priced under $50, Echo dash buttons, so there’s a lot of investment going on, and there will continue to be, especially related to prime. Innovation and investment will continue and can be lumpy over time.”

The pace of innovation in AWS and the scale of its business has allowed it to do the ‘heavy lifting for Amazon’ said one Wall Street blogger.

By constantly re-inventing itself AWS has been able to cut its prices eight times since April 2014, said Phil Hardin, Amazon director of investor relations, in an analyst conference calls. “The company rolled out 539 new features and services in the past year alone, many of which have been designed so that its customers can access enterprise-grade services for a fraction of what they would traditionally cost on-premise,” said Hardin.