Why AWS’s Growth Is Critical for Amazon’s Bottom Line Growth

While some of Amazon’s (AMZN) business segments are seeing slowing growth, one segment is growing relentlessly: AWS (Amazon Web Services), which rents computing power to enterprises and governments.

AWS generated revenue of $7.43 billion in the fourth quarter, a 45.7% rise from the same quarter in 2017. Wall Street had expected the segment to generate $7.29 billion in the quarter. The segment has seen growth in the mid- to late 40s in terms of percentage for several quarters now.

For the whole year, the business made a whopping $25.66 billion in revenue, an impressive 46.9% rise from 2017.

AWS is the global leader in the cloud computing market and is benefiting by being the early mover in the sector.

The company is seeing astonishing growth in the segment despite its size. AWS is also well positioned to keep growing. However, Microsoft’s (MSFT) Azure, which is AWS’s closest competitor, is growing much faster than AWS, which is seeing a slowdown.

Azure’s revenue rose 76% YoY in the most recent quarter compared to 79% in the previous quarter. It’s worth mentioning that AWS is still much bigger than Azure.

AWS’s rapid growth bodes well for Amazon. AWS now makes up over 10% of Amazon’s total revenue. AWS had an operating margin of 29.4% in the fourth quarter compared to 26.5% in the corresponding quarter in 2017. Hence, AWS’s rapid growth is acting as a tailwind for Amazon’s bottom line.