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AWS remains Amazon's golden goose in Q3

The share price fell as Amazon reported smaller profits in Q3, but with AWS going from the strength to strength, the picture remains largely positive

Amazon Web Services (AWS) blew it out of the water again in the third quarter, reporting revenues of $3.23bn, up from $2.09bn last year, representing growth of nearly 55% year-over-year and nearly 12% sequentially.

This translated into $861m in operating income at a margin of 26%, more than double the $428m made in the same period last year.

AWS is well on track to surpass Amazon’s goal of $10bn in revenue for 2016.

Darin Manney, head of investor relations, for Amazon said during the conference call with analysts that the company was working hard to reduce friction, in order to onboard further companies onto the AWS.

“We continue to invest in AWS on behalf of our customers in addition to the technologies that make integrations easier that helps companies move from an on-prem or a hybrid IT environment into AWS,” said Manney. “Many of our AWS customers are beginning to choose and continue to choose the AWS Schema Conversion Tool which really switches database engines to get out of old guard proprietary databases and onto AWS.”

Elsewhere in the company, it was a mixed bag. Amazon missed profit expectations by a long shot. Net income stood in at $252m, which put Amazon in the black for six consecutive quarters – but was a significant drop from the $857m the retailer netted in Q2.

Amazon has a habit of reinvesting profits back into the business, and despite revenue being largely in line with expectations, stock was down as much as 7% in after hours.

The focus of re-investment for Q3 seemed to be Amazon’s artificial intelligence-engine – aka Alexa. Jeff Bezos CEO is pushing the voice-controlled technology hard. He has said that Amazon now has more than 1,000 employees working on the tech. 

“Alexa may be Amazon’s most loved invention yet - literally - with over 250,000 marriage proposals from customers and counting,” said Jeff Bezos, founder and CEO of Amazon. “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.”

 

 

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