Amazon.com last week reported soaring quarterly revenue and profits, results that reflected booming sales in its e-commerce operation while also putting into sharp focus how central its younger cloud computing business is to its future.
Amazon's revenue leaped to $29.1 billion, a 28 per cent increase over the same period last year. And it delivered a profit of $513 million, or $1.07 a share, a sharp improvement over the loss of $57 million, or 12 cents a share, it recorded during the same quarter in 2015.
And though most consumers know the Seattle-based company for the deliveries it leaves on their doorsteps or the hours of streaming video it provides, the health of Amazon's business increasingly relies on Amazon Web Services, or AWS.
AWS accounted for $604 million in operating income this quarter, compared with $588 million for its hulking North American business, which is largely comprised of retail sales. The share is particularly staggering considering that AWS's total sales haul was just a tiny fraction of the revenue the company made from North American shoppers: Net sales for AWS were $2.6 billion in the quarter, compared with $17 billion for the North America segment. (Amazon's international segment delivered an operating loss of $121 million.)
Investors had been watching closely for sales momentum in Amazon Web Services because of its appealingly fatter profit margins. AWS saw a robust 64 per cent sales growth compared to the same period in the previous year.
Amazon's stock popped more than 12 per cent in after-hours trading as the results blew past analysts' forecasts. Amazon's stock has been down about 11 per cent so far this year.
Amazon continued efforts this quarter to strengthen its position across several retailing categories. With the launch in March of a nightly, QVC-like streaming show called "Style Code Live," it continued to try to make itself into more of a destination for fashionistas. And it expanded the products available for order with Dash buttons, which are small, Internet-enabled devices that can be placed in a pantry or laundry room so shoppers can stock up on items like granola bars, coffee or detergent with the touch of the button.
On a conference call with investors, chief financial officer Brian Olsavsky said an increase in selection played a key role in fueling retail sales growth. He said that expanded assortment of merchandise was largely fueled by the company's Fulfilled by Amazon program, in which third-party sellers store their goods in Amazon warehouses and allow Amazon to pack and ship the orders.
Amazon also recently rolled out new devices, the Echo Dot and the Amazon Tap, that use its Echo voice-activated personal-assistant software.
The e-commerce giant still faces plenty of challenges to its profitability: Its fulfillment costs, or expenses related to shipping, climbed to $3.7 billion from $2.7 billion. This is partly why the company is investing in myriad different logistics schemes, including buying its own trucking fleet and experimenting with an on-demand, Uber-like network of drivers that can make deliveries to customers' homes.