King Of The Cloud: Amazon Web Services Hits $14 Billion Annual Revenue Run Rate

The Amazon Web Services (AWS) public cloud hit a $14 billion run rate in the fourth quarter of 2016, even as its pace of growth slightly fell short of previous quarters, Amazon reported Thursday.

With more than 300 new features released on the cloud platform in the fourth quarter, and more than 1,000 in the full year, innovating rapidly remains Amazon's primary strategy for winning new users to its cloud, said Amazon CFO Brian Olsavsky during the Q4 earnings call.

"We've been pretty clear this business is [about] giving new functionality for customers, giving price cuts and then working on the operating efficiencies," Olsavsky said.

[Related: AWS Doesn't Disappoint In Amazon's Q3 Earnings]

In the quarter that ended Dec. 31, AWS saw more than $3.5 billion in sales, notching 47 percent year-over-year growth. That was a slight slowdown from the 55 percent growth seen in Q3, and short of analyst revenue expectations by about $100 million for the public cloud leader.

The entire AWS fiscal year netted $12.2 billion in revenues, compared to $7.9 billion in 2015. AWS operating income totaled $926 million for the quarter to cap a year that saw $3.1 billion in profit.

Asked by an investor about the impact of price cuts in driving down revenues, Olsavsky said the seven reductions just in Q4 didn’t slow growth. Frequent price cuts are "going to be a constant in this business," he said.

Several of the reductions in pricing went into effect on Dec. 1, so only one-third of their impact on the business showed up in the quarter's financials, he added.

Olsavsky said Amazon's highly profitable cloud unit is happy to have customers that range from startups to large enterprises. Across that customer base, including small and midsize businesses and the public sector, AWS has seen strong growth in recent months, he said.

The larger Amazon business earned $1.54 a share on $43.7 billion in sales. While earnings per share surpassed Wall Street's expectations of $1.36, the revenue was about $1 billion below what analysts were expecting.

Amazon shares, which had climbed almost a percentage point during trading that day to close at $839.95, dropped $34.76 (-4.14%) to $805.19 in after-hours trading.