Why Upbeat Results Are Expected from Amazon Web Services in 2Q16


Dec. 4 2020, Updated 10:52 a.m. ET

Growth prospects for Amazon Web Services are encouraging

Amazon’s (AMZN) cloud-computing segment, AWS (Amazon Web Services), is growing at a rapid rate. It continues to maintain a market-leading position in the cloud space. The segment is expected to deliver positive results in 2Q16.

During the last-reported quarter, Amazon’s revenue from AWS rose by 64% YoY (year-over-year) to $2.4 billion. The segment’s operating profits tripled from $195 million in 1Q15 to $604 million in 1Q16. The segment accounted for over 50% of Amazon’s total operating income, which stood at $1.1 billion.

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Strong growth potential

Amazon’s AWS segment has witnessed robust margin growth in the past. AWS is growing faster than Amazon’s traditional business segment, as the company has invested heavily in its cloud-computing arm, keeping it ahead of the competition.

The cloud services market is the latest megatrend in the technology space. Big names such as Microsoft (MSFT), Google (GOOG), and IBM (IBM) are pouring billions of dollars into their cloud businesses. The market for cloud-computing is growing at a rapid rate, and Amazon—being the industry leader—is likely to significantly benefit.

Despite the company’s huge potential for growth, increased competition is likely to slow the pace of its growth in the future. Amazon is the leader in the cloud services market, but increased competition has forced service providers to lower their prices. This is expected to impact the AWS segment’s margin growth as Amazon continues to cut the prices of its cloud solutions.


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