AWS casts a ray of strong sunshine on Amazon's profitability

Cloud sales for the third quarter were up 78 per cent from a year earlier

Much of Amazon's sunny earnings report for the third quarter of 2015 can be traced back to its Web Services Cloud division.

AWS brought in $US2.09 billion in sales in the quarter ended September 30, representing a jump of 78 per cent over the same period last year. With an operating profit of $US521 million -- up from just $US98 million a year earlier -- the unit’s operating profit margin was 25 per cent for the quarter, up from 21 per cent in Q2 and 17 per cent in Q1.

Overall, Amazon beat analyst expectations with $US25.4 billion in net sales and a profit of $US79 million, or $US0.17 per share. Shares of the company's stock shot up by as much as 11 per cent in extended trading as a result.

Amazon only began breaking out AWS numbers earlier this year, so these are among the first indications the market has seen of the unit's financial performance.

"We're continuing to see a great acceleration in the pace of innovation," said Brian Olsavsky, Amazon's chief financial officer, on the company's earnings call Thursday afternoon.

AWS has launched more than 500 significant new features this year, Olsavsky said, and it has lowered prices eight times since April 2014.

"Customers are really responding," he said. "They like the speed and agility AWS provides, and they like the new features, many of which allow them to lower their costs."

Aurora, for example, was launched earlier this year as a high-performance alternative to the widely used open-source MySQL database.

Nevertheless, it's still early days, Olsavsky acknowledged.

"We enjoy leading this business, and we believe we're adding new services and features at a rate faster than many others," he said. "The growth rate will remain lumpy and bumpy going forward, but we're very encouraged."

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Katherine Noyes

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