Cloud business shines in Amazon results

Amazon's cloud services division propelled the retail giant to profit and revenue that exceeded analysts' expectations for the first three months of the year.

Amazon Web Services brought in US$2.6 billion (A$3.4 billion) in revenue in the first quarter, the company reported today, a 64 percent increase year on year. Its growth rate was, however, slower than in recent previous quarters.

Operating income for the cloud business reached US$604 million for the quarter and US$2.2 billion over the year. The division accounted for 36 percent of Amazon's operating income in the first quarter, despite only contributing around 9 percent of total sales.

Even though operating margins fell at the unit compared to last quarter, as Amazon spends heavily to compete with rivals like Microsoft and Google, they remain a healthy 27.9 percent. That compares to 28.5 percent last quarter, and 16.9 percent a year earlier.

AWS, launched 10 years ago, delivered more profit in the quarter than Amazon's retail business. Research firms say AWS has more than 30 percent of the cloud computing market and remains far ahead of rivals including Microsoft and Google.

Amazon's overall results are a sharp contrast to the disappointing fourth quarter it reported in January, which renewed worries among some shareholders about the company's comparatively thin profit margins.

Shares of the company jumped nearly 13 percent to US$679 in extended trading today.

Amazon's performance also assuaged concerns about a broader slowdown among technology companies after Apple, Microsoft and Intel all reported disappointing earnings.

"It did restore my faith," said Dan Conde, an analyst at the Enterprise Strategy Group.

Amazon displayed impressive growth for a company its size, with revenue rising 28 percent to US$29.1 billion and net income of US$513 million compared to a loss of US$57 million a year earlier.