Amazon’s Q2 Results
Microsoft and Google released spectacular results, and Amazon Web Services, the king of cloud market, was not to be left behind.
During the second quarter of 2017, AWS earned $4.1 billion in revenue. This was almost 11 percent of the overall revenue of Amazon during this period. This is a significant jump from the revenue it earned over the previous two quarters, which were, $3.54 billion and $3.66 billion respectively. The overall sales for this period was a whopping $38 billion.
One of the areas that did see a big decline is in the operating margin, that had reduced to 22.3 percent, the lowest value over the last six quarters. During the conference call, Brian Olsavsky, the Chief Financial Officer of Amazon, explained that this fall in operating margin was due to a 71 percent increase in assets that were acquired in the form of capital leases for its cloud business.
These capital leases have directly contributed to a manifold increase in the infrastructure of AWS, especially its geographic expansion across different countries. Over the last year, AWS has stepped up its operations in a big way to counter the threat from companies like Microsoft and Google. And these investments are paying off.
At this point though, it’s difficult to say how much better AWS is when compared to Google and Microsoft. This is because Amazon is the only company that discloses the revenue and performance of its cloud business separately while the other two club it in a bucket called “other revenue.” So, it’s hard to say how much contribution came from the cloud business in this bucket, so a comparison becomes difficult.
One good way to ascertain performance is through market share, even if it’s not an accurate one. By this parameter, Amazon gained a one percent market share over the last four quarters. This makes it a dominant player in the cloud market, though Microsoft and Google are fast catching up. During this same period, Microsoft’s market share increased by three percent while Google and IBM stayed steady at one percent increase.
Nevertheless, this is another excellent performance by AWS as it dominated the cloud market with a market share of 40 percent. This company alone has generated $1.2 billion in revenue over the last four quarters and this trend is expected to continue as more companies, especially in the developing world, adopt cloud over the rest of 2017 and in years ago.
Since AWS has established its infrastructure and presence in all growing economies, either by itself or through collaboration, it’s in the driver’s seat to make the most of cloud adoption across these countries.
All this is good news for investors as the share prices moved up after the results were announced. In fact, this rise in share price put Amazon’s CEO, Jeff Bezos, as the richest man in the world. However, the position went back to Bill Gates when Amazon’s shares stabilized over the next few days.