Editor’s note: Amazon Web Services adapts to the impact of IaaS price cuts with Chime, Connect and more to come, says Technology Business Research Analyst Meaghan McGrath. Plus: A recap of Amazon’s earnings.
HAMPTON, N.H. – IaaS price cuts hinder sequential growth, but innovation in new service areas will help AWS remain a dominant driver of corporate performance.
Amazon Web Services (AWS) finally eclipsed 10% of corporate revenue in the quarter, as the business unit delivered strong year-to-year revenue growth of nearly 43% and recognized almost $3.7 billion in 1Q17 revenue according to earnings released last week.
The business unit’s sequential progression, however, was significantly muted by the full-quarter impact of service price cuts made effective Dec. 1, 2016.
Although executives on Amazon’s earnings call elaborated little on the data released in the company’s press release, it is clear the company expects to further accelerate investment in new service innovation.
TBR expects services outside AWS’ core PaaS and IaaS proficiencies, similar to the recently launched Amazon Connect and Amazon Chime services, will continue to be announced as AWS looks for new avenues to counter growth deceleration from the scaling IaaS and PaaS revenue base and related price reductions.
Amazon.com Inc. last Thursday reported first-quarter profit of $724 million.
The Seattle-based company said it had profit of $1.48 per share.
The results topped Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of $1.03 per share.
The online retailer posted revenue of $35.71 billion in the period, also beating Street forecasts. Eleven analysts surveyed by Zacks expected $35.39 billion.
For the current quarter ending in July, Amazon said it expects revenue in the range of $35.25 billion to $37.75 billion. Analysts surveyed by Zacks had expected revenue of $36.93 billion.
Amazon shares have increased 22 percent since the beginning of the year, while the Standard & Poor’s 500 index has increased nearly 7 percent. In the final minutes of trading on Thursday, shares hit $916.99, an increase of 51 percent in the last 12 months.
Source: The Associated Press