Amid all the fanfare and cheerleading, Amazon's AWS growth is slowing

'Meteoric' success downgraded to mere 'rocketing'

Amazon Web Services growth slowed down a bit, but still brought Amazon cash at a record clip in the first three months of 2017.

On Thursday, the Jeff-Bezos-led retail and cloud empire talked up another strong quarterly performance in its first financial report of the 2017 fiscal year:

  • Revenues of $35.7bn were up 23 per cent over the $29.1bn Amazon reported in Q1 2016. That beat Wall Street's expectations of $35.3bn.
  • Net income was $724m, up from $513m in the year-ago quarter. That's eight quarters in a row now the internet souk has turned a profit. Operating income fell six per cent, though, to $1bn.
  • Non-GAAP earnings per share were $1.48, beating analyst estimates of $1.12.
  • AWS revenues were $3.66bn, up 43 per cent from Q1 2016's $2.56bn.
  • AWS operating income of $890m was up 48 per cent year-over-year.
  • AWS expenses were $2.77bn for the quarter, up from $1.96bn in Q1 2016.

The 48 per cent growth in AWS operating income is a decrease from the 69 per cent year-on-year growth AWS logged in Q1 2016. This is the seventh quarter in a row that the cloud service's operating income growth has been lower than the year-ago period, suggesting that AWS growth is starting to plateau.

That may not be a reason for concern at AWS, so much as a signal that the company's booming growth phase is leveling off to a slower, but more steady pace of growth. Amazon told analysts it will continue to spend on growing the cloud business to keep up with the flow of new customers.

Meanwhile, the retail side of Amazon continues to move along at a steady pace. In North America, operating income of $596m was virtually flat compared to last year's $588m haul. Internationally, Amazon retail took a loss of $481m, compared to a $121m loss in last year's quarter.

Founder Jeff Bezos noted that Amazon is spending big on international markets, including India, where the company is pushing its Prime and Fire TV services.

"We're grateful that customers are responding – Amazon.in is the most visited and the fastest growing marketplace in India," Bezos said. "It's still day one for e-commerce in India, and I assure you that we'll keep investing in technology and infrastructure while working hard to invent on behalf of our customers and small and medium businesses in India."

For what it's worth, Amazon's chief financial officer Brian Olsavsky told analysts on a conference call "customers migrated more than 23,000 databases" using the AWS Database Migration Service since that launched in March last year.

Shares in Amazon were up 0.88 per cent at $917.30 in after-hours trading. ®


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