Editor’s note: Amazon Web Services’ growth is helping boost Amazon’s bottom line with its strongest performance to date, says Technology Business Research Analyst Meaghan McGrath.
HAMPTON, N.H. – Accelerated AWS usage balances broader Amazon underachievement with growth that provokes expedited capacity expansion, based on the tech giant’s latest earnings report.
Amazon Web Services (AWS) delivered its strongest absolute dollar growth, both sequentially and year-to-year, in dominant fashion, launching to a more than $16 billion annualized run rate with $4.1 billion in 2Q17 revenue.
Amid otherwise lackluster Amazon performance, executives on the company’s earnings call elaborated on AWS’ solid performance, noting the 42% year-to-year revenue growth was supported by the fact that usage of the largest AWS services is growing at a faster pace than revenue, and accelerating, which further prompts global capacity expansion.
This rapid geographic expansion, however, hinders AWS’ operating margin, which dropped 260 basis points from 2Q16 to 22.3% in the quarter.
While revenue growth will continue, so will global infrastructure expansion to meet customer demand, and margins will continue to be pressured.
Despite this margin pressure, AWS will remain a critical component to Amazon’s corporate performance, driving both revenue growth and ongoing profitability.