Going into last week, analysts didn’t expect much out of a relatively new operation that started as an offshoot for one of the biggest names in the stock market.
Analysts projected zero profits at best with many estimating a significant loss in the revenue column…
Instead, the financials for this operation were finally released for the first time, and Wall Street was shocked.
It’s not often that the word “stunned” is used to describe Wall Street analysts and investors, but that’s exactly what happened last week.
That’s because Amazon (AMZN) decided to reveal just how much its cloud computing operation—Amazon Web Services, or AWS—has been making…
Despite the general analysts’ sentiment pointing towards no profit or as low as a negative 20% operating profit margin, AWS actually made over $5 billion in revenue over the last year.
The real operating profit margin was actually 13%, which is 33% higher than what some analysts estimated.
And those numbers launched shares of AMZN higher last Friday as the price leaped from $389.99 the night before to $439 the next morning before closing the week at $445—that’s an increase of roughly 14% in 24 hours!
All of that is pretty impressive coming from the AWS offshoot, which started because Amazon became so affective at operating computers for their own website that they saw an opportunity to provide the same service for others.
So what does all of this mean?
Well, in the short term, it means that AWS is more profitable and faster growing than the rest of AMZN when you look at the numbers. AWS’s revenue grew 49% last quarter in comparison to the overall company revenue climbing just 15% in the same time frame.
But the longer-term impact could be much more interesting—Amazon just showed everyone that the cloud can be massively profitable. If others, like Microsoft, can duplicate AWS’s numbers or even get relatively close, we might be seeing the witnessing the adolescence of the next investment frontier.
We’re seeing the potential right now, and it certainly looks like a profitable place to be at the moment…
