Amazon Profit Growth Disappoints Despite Cloud Strength

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Shares in Amazon slump over less than expected profits, despite continuing strength of its AWS division

Amazon latest financials show the e-commerce giant is performing well, with rises in both profits and sales. as well as cloud growth. 

But the market reacted negatively to the results after its profit came in well below what Wall Street was expecting.

Profitable Cloud

For the third quarter ending 30 September, Amazon posted a net profit of $252 million (£208m), or $0.52 (£0.43) per diluted share, compared with $79 million (£65m), or $0.17 (£0.14) per diluted share, in the same year-ago quarter.

This earnings per share was well below what Wall Street had been expecting at $0.79 (£0.65) a share, and shares in the company fell five percent in after-hours trading.

Revenues meanwhile were in line with analyst expectations and rose an impressive 29 percent to $32.7 billion (£27bn), from $25.4 billion (£21bn) a year earlier.

amazonIt is clear that Amazon Web Services (AWS), the firms cloud unit, continues to be principle profit driver. Indeed, it is the largest out of all the public cloud providers, and enjoys a $10 billion annual run rate.

And during the last quarter it earned $3.2 billion (£2.6bn), up nearly 55 percent from $2.08 billion (£1.7bn) for the year-ago period.

Of that $3.2 billion in AWS sales, $861 million (£710m) was profit. This is especially impressive considering repeated AWS price cuts and intense competition from the likes of Microsoft and Google.

Despite the strong performance of AWS, Jeff Bezos, founder and CEO of Amazon chose to focus on Alexa, Amazon’s voice service, in his statement.

“Alexa may be Amazon’s most loved invention yet – literally – with over 250,000 marriage proposals from customers and counting,” said Bezos. “And she’s just getting better. Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful – wait until you see some of the surprises the team is working on now.”

AWS Expansion

Earlier this week it was revealed that AWS is getting a new migration service to make it easier for firms to move existing virtualised applications to Amazon EC2 without prolonged maintenance periods.

And rumours were also recently confirmed when it was revealed that VMware Cloud services will be soon be available on AWS infrastructure, despite the two being former bitter rivals.

AWS is also to open data centres in France next year, allowing French customers to run applications and store data in the country.

That will be fourth region in Europe for AWS, alongside its existing regions in Frankfurt and Ireland. The planned opening of a UK region is expected before next February.

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Author: Tom Jowitt
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