Amazon CFO: 'There's Plenty Of Room For Multiple Winners' In The Cloud Business
Amazon Web Services isn't showing signs of ceding its leadership in the public cloud market any time soon, with second-quarter financials released Thursday describing a cloud business that's maintaining rapid growth.
The quarter that ended June 30 was successful for the e-commerce giant as a whole, delivering revenue of $30.4 billion—the high end of guidance—while improving on operating efficiencies, Amazon CFO Brian Olsavsky told investors in the company's earnings call.
AWS reported $2.9 billion in sales—up 58 percent year-over-year. Amazon's strategy for maintaining its commanding lead in the cloud market is continuing to rapidly add features to the service while reducing prices, Olsavsky said.
"We believe customers will choose AWS primarily for three factors," Olsavsky said. "Functionality and [the] pace of innovation we bring to the table, our partner and customer ecosystem, and our experience."
"Having said that, there's plenty of room for multiple winners in this business," he added when asked about the multi-cloud environments enterprise customers are increasingly deploying.
Amazon overall saw revenue growth of 31 percent in the second quarter, with $1.78 earnings per share, versus an expected $1.11. And AWS sales were roughly $60 million above what Wall Street predicted.
The company turned a $718 million profit on that cloud business, which continued to gain economic efficiencies, resulting in margins of almost 30 percent, Olsavsky said.
"These margins will fluctuate from quarter to quarter, but we're very happy with the year-over-year improvement," Olsavsky said.
To keep growing its public cloud business, Amazon is focusing on adding capabilities and expanding its geographic footprint, he said.
"The rapid pace of innovation continues to stretch our lead," Olsavsky said, noting the division added almost 500 new services and features in the first half of 2016.
Advanced toolsets for building big data, analytics, mobile, Internet of Things and machine learning applications deliver greater value to AWS customers, he added.
The CFO didn't directly respond to a question asking about the percentage of enterprise workloads Amazon believes have shifted to the public cloud, instead telling investors that the conversion process is still in early stages.
"We like our industry-leading position in the cloud space. And we're working on things that will incent more and more customers to accelerate their cloud conversion," Olsavsky said, "specifically lower prices and more services."
Amazon also wants to make it easier for customers to work with AWS, partly by facilitating the deployment of hybrid data centers, Olsavsky told investors.
In the coming year, AWS plans to add nine availability zones in four regions of the world. Those new facilities, like one recently added in Mumbai, India, will make it easier for customers to run workloads on AWS, especially where they have latency or regulatory concerns. That infrastructure expansion isn't expected to impact earnings in the coming quarter, he said.
Amazon issued revenue guidance for the third quarter between $31.0 and $33.5 billion.
Q2 was the fifth consecutive profitable quarter for a company that was once almost always expected to post negative earnings.
Amazon stock, which closed at $752.61 on Thursday, was up to almost $767 a share in after-hours trading.