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AWS on course to become $6bn business, as sales soar during Q2

Cloud giant's second quarter success prompts speculation about what Amazon might do next with the business division

Amazon Web Services (AWS) has chalked up another strong quarter of growth, fuelling speculation its parent company might opt to spin-off the cloud computing giant.

As stated in Amazon’s second quarter (Q2) results, AWS saw its revenue increase, year-on-year, by 81% to $1.82bn. Over the same time period, its profits also quadrupled from $77m in Q2 2014 to $391m in 2015.

The results also revealed an uptick in the division’s operating margin from 17% in Q1 to 21% during the three months to 30 June.

In terms of what’s fuelling its success, the company has credited its decision to push out 350 services for AWS users in 2015, as well as its decision to increase its global footprint.

During a conference call to discuss the results, transcribed by Seeking Alpha, Brian Olsavsky, senior vice-president and chief financial officer, said: “From a distribution of customers, it is a global business. We have regions spread throughout the world. We have 11 regions at this point and have announced plans to launch a region in India in the future.”

According to a half-year breakdown of the cloud firm’s performance, the company achieved sales totalling $3.4bn during the first six months of 2015. If things continue on this trajectory, AWS could be on course to pass Amazon CEO Jeff Bezos’ earlier declaration about it being a $5bn business.

This was made on the back of Amazon’s decision during Q1 to divulge details about the individual contribution AWS makes to the retailer’s overall business.

This revealed that AWS generated revenue of $1.57bn in the three months to 31 March, while Amazon banked a net loss of $57m.

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In contrast to Q1, Amazon as a whole performed extremely well during its most recent quarter, after the company reported a surprise profit of $92m.

AWS has been cited as a major contributor to this success, which confounded the expectations of Wall Street analysts who had predicted it would suffer another loss during Q2.

However, the continued success of AWS has prompted speculation that – as time goes on – Amazon might decide to spin it out and run it as a standalone division.

Speaking to Computer Weekly, Richard Holway, chairman of IT analyst house TechMarketView, said the disparate nature of Amazon and AWS’s activities could pave the way for a successful business split.

“For AWS to grow so fast, so quickly and become profitable is pretty stunning. They seem to have the lion’s share of the public cloud market, and even the likes of HP [Hewlett-Packard] seem to admit they can’t compete here,” he said.

“Companies that have disparate operations do tend to split, though. We are seeing that with HP and possibly with Qualcomm.

“AWS is a B2B [business-to-business] company that is pure tech and Amazon is 100% B2C [business-to-consumer] and classed by Nasdaq as a general retailer,” he added.

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