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Amazon's Cloud Business Booms In Ecommerce Giant's Most Profitable Quarter Ever

Amazon Web Services is becoming an unstoppable freight train, and it contributed more than 60 percent of Amazon's operating income despite generating less than 10 percent of sales.

Amazon reported the most profitable quarter in its 21-year history Thursday, and its cloud business Amazon Web Services was the star of the show.
AWS generated revenue of nearly $2.6 billion during its fiscal fourth quarter ended March 31, up 64 percent year-over-year. Operating income was $604 million, compared to $195 million in the year-ago quarter. The cloud unit's operating margin was 23.5 percent during the quarter, compared to 16.9 percent a year ago.
Amazon's overall operating income was $1.07 billion for the quarter, compared to $255 million during last year's quarter. Amazon reported profit of $513 million, or $1.07 per share, on revenue of $29.1 billion. Wall Street analysts had forecast 58 cents per share and $28 billion in revenue.
AWS, which launched just over 10 years ago, was responsible for around 60 percent of Amazon's operating income during the quarter, even though it generated around 9 percent of Amazon's overall sales.
The quarterly results may have been even more impressive if Apple hadn't moved a significant portion of its cloud business from AWS to Google's public cloud earlier this year, as CRN in March. Amazon executives didn't address the move during the company's earnings call.
Amazon CEO Jeff Bezos said in his annual letter to shareholders earlier this month that AWS is this year. Amazon has reported combined sales of $8.7 billion since it first started breaking out AWS revenue four quarters ago.
On Amazon's earnings call, CFO Brian Olsavsky said the Seattle-based vendor is pleased with the results and plans to keep the pressure on cloud rivals.
"We think it’s very early, and there’s plenty of room in this industry for multiple winners, said Olsavsky. ’We like where we are. We have a leadership position and we will certainly try to build on it."
AWS partners who've grown accustomed to jaw-dropping financial results over the past year said they attribute the blowout quarter to Amazon's intense focus on customers.
Amazon's customer-centric approach extends to AWS and also benefits the partner ecosystem, said Patrick McClory, senior vice president of platform engineering and delivery services at Datapipe, an AWS partner in Jersey City, N.J.
"AWS has been responsive in working with us," McClory said. "You can see the amount of effort they're putting into improving the partner ecosystem at a business and technical level."

Carla Cole, senior vice president of sales and marketing at 47Lining, a Boulder, Colo.-based partner, thinks another key to the success of AWS is that its services are simple for partners to use.
"All of their services elegantly follow design principles that empower customers to easily snap together underlying building blocks to solve business-level problems," Cole said in an email. "[The services] 'just work' in the same way for all customers in all industries, in all parts of the world."  
As more enterprises complete their evaluations of public cloud and prepare to boost their usage, AWS is well positioned to attract their business, said John Sankovich, executive vice president at InfoReliance, an AWS partner in Fairfax, Va.
"Once they get into AWS, they are accelerating additional migrations and asking 'What else can we migrate to AWS?'," said Sankovich.
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