Amazon Finally Reveals its Cloud Financials

Lately, Amazon (Nasdaq: AMZN) has started revealing more financial details about their business segments. Last quarter, they spoke about Prime and this quarter, they shared a peek into the world of their cloud business. And, the market is pleased with what they saw.

Amazon’s Financials

Amazon’s first quarter revenues grew 15% over the year to $22.72 billion, ahead of the market’s expected revenues of $22.37 billion. Net loss of $0.12 per share was also ahead of the Street’s forecast of a loss of $0.14 per share.

By segment, net product sales increased 9% to $17.08 billion and net services sales grew 39% to $5.6 billion. Among operating metrics, active customer accounts increased 8 million to 278 million, with over 2 million active seller accounts.

For the current quarter, Amazon projected revenues of $20.6 billion-$22.8 billion. Operating income is expected to range from $50 million to a loss of $500 million. The Street had forecast revenues of $22.1 billion for the quarter.

Amazon’s Cloud Growth

As part of their result announcement, Amazon finally reported some details on their cloud segment. For the quarter, Amazon Web Services (AWS) revenues grew 49% over the year to $1.57 billion. Also, unlike their other businesses, the cloud is a profitable segment, generating an operating profit of $265 million. The market was expecting a much lower profitability for the segment. Amazon claims that the AWS is a $5 billion business and growing fast.

Their financials make Amazon the biggest cloud service in the market. In fact, according to Synergy’s research on the cloud infrastructure services, AWS is bigger than the combined revenues of its biggest four competitors – Salesforce, Microsoft, IBM, and Google.

Amazon continues to grow their cloud offerings and during the recent quarter announced several enhancements. They released Amazon Machine Learning, a fully managed service that will simplify the ability to use historical data to build predictive models for developments. They also released an AWS Marketplace for Desktop Apps that will let customers search for and buy applications for their Amazon WorkSpaces cloud-based desktops. They have released the Amazon EC2 Container Service, a high-performance container management service that makes it easy to run distributed applications using Docker containers on AWS. They’ve also introduced the latest generation of Amazon EC2 Dense-storage (D2) instances, and larger, faster Amazon Elastic Block Storage (Amazon EBS) volumes to the cloud to accelerate the disk read throughput.

Amazon’s Enterprise Focus

As part of new offerings for the enterprise, Amazon recently announced the release of Amazon Business Marketplace. Amazon had entered the $7.2 trillion B2B wholesale market back in 2012 by launching Amazon Supply. Within two years, the service had a portfolio of over 2.2 million products available for sale in 17 categories, ranging from tools and home improvement to janitorial supplies. Earlier this month, they announced plans to shut down Amazon Supply, and replace it with Amazon Business Marketplace. The new service will be available to businesses and they will be able to purchase business-only products with bulk discounts and free 2-day shipping on orders over $49.

The marketplace will also offer additional services such as the ability for businesses to interact with experts to make more informed decisions about products. Businesses will also be able to integrate purchasing platforms like Ariba into Amazon’s service and thus enable multiple users to use a single account and create workflows and purchase authorizations.

Forrester estimates the B2B market to be worth $9 trillion by the end of 2015, of which nearly $1 trillion will be transacted online. Amazon is making a beeline for this huge market opportunity.

Amazon is also expanding their little known advertising business, which sells ads across Amazon.com and Amazon-owned sites like IMDB.com. They are now expanding their ad platform to Kindle by partnering with brands to help distribute an e-book story written for the brand by an established author on the Kindle platform. For now, Amazon has a small portion of the digital advertising market, but they plan to increase that share with such innovative ideas.

The market is impressed with Amazon’s moves. Their stock is trading at $429.31 with a market capitalization of $199.4 billion. It touched a high of $452.65 soon after its result announcement.