AWS is very profitable: $265 million in profit on $1.57 billion in sales last quarter alone, for an impressive (for Amazon!) 17% net margin.Again via Barry Ritholtz, Re/Code reports on Q2:
Amazon Web Services, ... grew its revenue by 81 percent year on year in the second quarter. It grew faster and with higher profit margins than any other aspect of Amazon’s business.Revenue growing at 81% year-on-year at a 21% and growing margin despite:
AWS, which offers leased computing services to businesses, posted revenue of $1.82 billion, up from $1 billion a year ago, as part of its second-quarter results.
By comparison, retail sales in North America grew only 26 percent to $13.8 billion from $11 billion a year ago.
The cloud computing business also posted operating income of $391 million — up an astonishing 407 percent from $77 million at this time last year — for an operating margin of 21 percent, making it Amazon’s most profitable business unit by far. The North American retail unit turned in an operating margin of only 5.1 percent.
price competition from the likes of Google, Microsoft and IBM.Amazon clearly dominates the market, the competition is having no effect on their business. As I wrote nearly a year ago, based on Benedict Evans' analysis:
Amazon's strategy is not to generate and distribute profits, but to re-invest their cash flow into starting and developing businesses. Starting each business absorbs cash, but as they develop they turn around and start generating cash that can be used to start the next one.Unfortunately, S3 is part of AWS for reporting purposes, so we can't see the margins for the storage business alone. But I've been predicting for years that if we could, we would find them to be very generous.