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

Published on: March 12, 2019 / Updated on: March 12, 2019 – Author: Konrad Wolfenstein

While Amazon is likely to always be seen first and foremost as an e-commerce company, its business has changed remarkably in recent years. Last quarter, services contributed almost 40 percent to Amazon's revenue, up from 26 percent a year earlier. Most surprising to many, however, is the fact that Amazon's biggest hit isn't Amazon Prime or its well-known 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 market leader in the fiercely competitive cloud infrastructure market, contributed 58 percent to the company's operating income last quarter, despite contributing only 10 percent to the company's net revenue.

For many years, Amazon has reinvested almost every dollar it has earned into its long-term growth. Considering that the company's profits have just reached 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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