Amazon Isn’t Amazon without AWS
Cloud business in perspective
Amazon’s (AMZN) cloud computing unit, Amazon Web Services (or AWS), emerged as a powerful girder in Amazon’s sprawling business structure in 2Q17. AWS not only continued its double-digit growth rate but also contributed the entire profit that Amazon generated during the quarter.
AWS revenues rose 42% to $4.1 billion in 2Q17, accounting for slightly more than 10% of Amazon’s overall revenues of $38.0 billion. Despite only contributing a tiny fraction of the company’s overall revenues, AWS underpinned Amazon’s profitability.
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AWS supports Amazon’s bottom line
AWS generated an operating profit of $916 million, helping Amazon post an overall operating profit of $628 million in 2Q17. Without AWS, Amazon would have ended up with a steep loss in the quarter.
Amazon’s net profit came to $197 million in 2Q17, down sharply from $857 million in 2Q17, as shown in the chart above. The steep drop in net profit in the latest quarter was due to Amazon continuing its practice of prioritizing long-term growth over short-term profits.
Revenues up 25%
Amazon’s growth investments saw its overall revenues climb 25% in 2Q17 to top consensus estimates by ~$820 million. However, its operating expenses rose faster than its revenues at 28.2% to more than $37.3 billion.
Amazon, which gets the majority of its revenues from e-commerce operations, has been gaining market share from traditional retailers such as Walmart (WMT), Target (TGT), Best Buy (BBY), and JCPenney (JCP). Amazon has surpassed revenue expectations in three of the last four quarters.