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Amazon Web Services Revenue Comprises 57% of Amazon’s Profits

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Amazon delivered upbeat results in 2Q15

Amazon’s (AMZN) cloud services arm, Amazon Web Services (AWS) contributed $391 million toward Amazon’s $684 million operating profit for 2Q15, or 57%. AWS revenue for the second quarter of 2015 saw a growth of 81% compared to the same quarter last year. Amazon Web Services reported revenue of $1.82 billion in 2Q15 compared to revenue of $1.56 billion in 1Q15.

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Huge growth potential in Amazon Web Services

The Amazon Web Services business aims to leverage the fast-growing cloud services market. According to a report from IDC (International Data Corporation), the public IT cloud services market should grow from $56.6 billion in 2014 to $127.5 billion by 2018—a 23% compound annual growth rate. This would be about six times the growth rate of the overall IT sector, according to the report.

The IDC report notes that software-as-a-service, or SaaS, accounts for 70% of the overall cloud services market. Although Salesforce.com (CRM) is the leading player in the SaaS market, Amazon leads the combined IaaS (Internet-as-a-service) and PaaS (platform-as-a-service) market. According to a report from ITCandor, Amazon leads this combined market (both IaaS and PaaS) with a share of ~10%. It’s followed by Microsoft (MSFT), Google (GOOG), and IBM.

SaaS, IaaS, and PaaS represent crucial segments of the overall cloud-computing market. Leading the fast-growing IaaS and PaaS components of the cloud-services market makes AWS an attractive business.

For diversified exposure to Amazon, you could invest in the PowerShares QQQ Trust, Series 1 ETF (QQQ), which invests about 3.5% of its holdings in Amazon.

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