Amazon reported its second-quarter earnings today, and it was a bit of a whiff — and a bummer for Jeff Bezos, who is now no longer the Solar System’s richest human and has been relegated to the unfortunate position of second-richest human.
The company’s earnings came in lighter than Wall Street expected. But Amazon’s cloud server farms, AWS, once again appear to be propping up Amazon’s profitability. The company’s huge bet on building up the basis of modern cloud computing could, in a way, be held partially responsible for Amazon’s long streak of profitability for the past many quarters.
Here’s a quick breakdown of that:
Amazon has turned AWS into a business that’s on track to generate well over $10 billion in revenue annually. It also has some of the best margins of all of Amazon’s lines of business, and it continues to grow at a very healthy rate. AWS revenue was up 42% in the second quarter compared to 2016. That growth is slowing a bit, as AWS revenue was up 58% between 2015 an 2016.
Perhaps most importantly, Amazon signaled that it might return to losing money in the next quarter. Amazon has long been known to burn cash in the quest to continue to grow into one of the largest companies in the world, and Wall Street has generally been quite patient with that strategy. Yet despite that, Amazon put together a string of strong quarters and profitability, and on the year the company’s stock is up 40%.
It looks like that huge bet on building a bunch of buildings with servers inside is paying off as Amazon continues to look into other lines of revenue. Amazon is well known to bulldoze its way into new businesses, whether that’s buying a ton of grocery stores for $13.7 billion or running a video streaming service for people playing video games. While AWS’s growth is slowing, it certainly looks like it may be one of Amazon’s buoys for some time to come.