Cloud Business Drives Amazon's Profits - Cloud Business Drives Amazon's Profits

Published on: March 12, 2019 / Update from: March 12, 2019 - Author: Konrad Wolfenstein

While Amazon will probably always be thought of as an e-commerce company first, its business has changed remarkably in recent years. Last quarter, services contributed nearly 40 percent of Amazon's revenue, up from 26 percent a year ago. What's most surprising to many, however, is the fact that Amazon's biggest hit is neither Amazon Prime nor the company's big-name e-commerce platform, but a B2B cloud service called Amazon Web Services.

As our chart illustrates, Amazon's profits in recent years have been largely driven by its cloud business. Amazon Web Services (AWS), the leader in the highly competitive cloud infrastructure market, contributed 58 percent of the company's operating income last quarter, despite contributing just 10 percent of the company's net revenue.

For many years, Amazon has invested almost every dollar it has earned into its long-term growth. Considering the company's profits just rose to an all-time high, it seems that even Jeff Bezos is running out of ideas for reinvestment.

While Amazon will probably always be seen as an e-commerce company first, its business has undergone a remarkable transformation in recent years. In the past quarter, services accounted for nearly 40 percent of Amazon's revenue, up from 26 percent three years earlier. Perhaps most surprising to many though, is the fact that Amazon's greatest hit is neither Amazon Prime, nor the company's namesake e-commerce platform, but a B2B cloud service named Amazon Web Services.

As our chart illustrates, Amazon's profit has largely been driven by its cloud business in recent years. Amazon Web Services (AWS), the leader in the highly competitive market for cloud infrastructure, accounted for 58 percent of the company's operating profit in the past quarter, despite contributing only 10 percent to the company's net sales.

For many years, Amazon has reinvested nearly every dollar it earned in its long-term growth. Considering that the company's profit just soared to an all-time high, it seems like even Jeff Bezos is running out of ideas to reinvest all of it.

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