AWS growth slows but profits boosted by data centre efficiencies

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AWS growth slows but profits boosted by data centre efficiencies

Even as growth slowed slightly for Amazon Web Services in the third fiscal quarter, Amazon's cloud division became more profitable than ever due to more-efficient data centre operations, according to Amazon's CFO.

Brian Olsavsky told investors in an earnings call on Thursday they shouldn't read much into the down-tick in revenue expansion for AWS after three sequential quarters of year-over-year acceleration.

"This growth rate is going to bounce around," Olsavsky said. And 46 percent year-over-year growth for AWS, resulting in US$6.68 billion in revenue for the quarter ended 30 September, is "still very strong."

On those cloud sales, Amazon netted more than US$2 billion in profit.

AWS grew by 49 percent in the previous sequential quarter. But in Q3, AWS margins were up several points from Q2 to roughly 32 percent, delivering more than half the internet giant's total operating income.

Those escalating margins resulted from "a good year for gaining greater efficiencies from our infrastructure costs," he said. Amazon is always looking to take costs out of operating its data centres for AWS and the larger e-commerce business that sits on top of it.

Olsavsky encouraged investors to look at the cloud division's annualised run-rate, which has now surpassed US$26 billion. That figure was roughly US$18 billion after the third quarter of 2017.

Amazon remains happy with the growth it's seeing in AWS, he reiterated, which is driven by momentum in signing enterprise customers.

Amazon's overall business grew by 29 percent to US$56.6 billion in Q3, with US$3.7 billion in profit.

That came as a disappointment to Wall Street, which was expecting US$57.1 billion in revenue.

With guidance offered between US$66.5 billion and US$72.5 billion also lower than consensus expectations, the stock sank in after-hours trading.

Amazon closed Thursday at US$1782.17, but fell to US$1645.56 at publication time, a loss of almost 8 percent that wiped out slight gains made over the day.

Amazon did deliver earnings per share of US$5.75 that surpassed consensus estimates of US$3.08.

Dave Fildes, Amazon's director of investor relations, said the company's pricing philosophy as far as AWS is to "work relentlessly" to reduce costs, then pass those savings to customers in the form of lower rates for its cloud services.

It’s the same approach Amazon pursues aggressively across all its businesses, he said.

AWS has lowered prices 67 times since it launched, including a few decreases in the last few months, Fildes said.

That's a "normal part of our business for us."

This article originally appeared at crn.com

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