Editor’s note: Amazon reported a big loss in the second quarter on Thursday, and share prices dove. But a bright spot is its AWS – or Amazon Web Services – which shows growing strength in the cloud computing market, says Jillian Mirandi who is a senior analyst at Technology Business Research.

HAMPTON,N.H. – March price cuts affected AWS’ top line resulting in flat sequential revenue, while year-to-year growth remained strong.

AWS generated an estimated $1 billion in 2Q14, up 48% year-to-year, but sequentially flat. AWS’ revenue is largely driven by AWS’ core compute and storage services, both of which received drastic price cuts in March. AWS is healthy and will remain healthy in coming years driven by a quickly growing customer base and impressive customer wins despite price cuts effecting top line revenue.

On top of compute and storage, ongoing launches of higher-level services such as Kinesis, a dedication to hybrid IT, and enterprise investments will drive high double-digit growth across 2014.

Hybrid is quickly becoming a focal point of AWS’ strategy as the business moves into the enterprise market. With tools such as Amazon VPC, AWS Direct Connect and AWS Data Pipeline, customers are able to more easily extend on-premises IT through AWS . We believe that the majority of AWS revenue is driven by large enterprise clients, making it critical for AWS to invest in hybrid IT options.

  • Service launches addressing high growth markets demonstrate AWS’ ability to remain agile

In July, AWS announced cloud storage and content collaboration service Amazon Zocalo and new AWS mobile services. These service launches underscore the company’s evolving portfolio outside of core cloud compute and storage; AWS has released 250 service and features year-to-date. Amazon Zocalo and mobile capabilities are a natural next step for AWS; Zocalo addressing AWS end users and leveraging low-cost compute and storage, and mobile services addressing developer needs.

Amazon Zocalo, the company’s biggest move into the applications space to date, will compete with vendors including Box, Dropbox, EMC Syncplicity, Google Drive, and Microsoft OneDrive. AWS’ willingness and ability to go after new markets demonstrates its sustained agility in despite of its large and quickly growing size. Over the past year AWS has entered the analytics space with Kinesis, and the virtual desktop space with WorkSpaces.

Given its broad customer base, AWS has a large set of customers to cross-sell these new services, shielding itself from competition, while increasing enterprise appeal. Additionally, AWS can launch new services at low prices given its gained efficiencies with compute and storage and comfort with lower margins.

AWS released a new set of capabilities that enrich the developer experience of building, deploying and scaling mobile applications. AWS’ mobile services include Amazon Cognito (user identity and data synchronization), Amazon Mobile Analytics (application usage data collection and analysis), AWS mobile SDK (facilitating the mobile access of AWS services and optimize network usage) and Amazon SNS (mobile device notification manager).

These services will drive developer loyalty as an increasing number of customers demand mobile capabilities.

(C) TBR