Sunday, October 30, 2016

Amazon’s AWS Results Give Rivals Cause to Worry

Amazon (AMZN) has put to rest doubts about its ability to continue its already large enterprise cloud computing growth. The company said AWS (Amazon Web Services) revenue increased 55% year on year (or every year) to $ 3.23 billion in 3Q16. The results easily beat consensus forecasts which required an income of $ 3.17 billion in the cloud sector.

$ 10 billion in sales

The graph above shows the sales growth trend of AWS in the last five quarters. AWS Amazon expects revenue to hit $ 10 billion this year. In addition to revenue growth, margins in the Amazon cloud as business improves. The company said the operating margin increased to a record AWS 32% last quarter. The operating margin of the cloud division was 30% in the same quarter last year.

The strong growth in AWS is a challenge for Microsoft (MSFT), Alphabet (GOOGL) and International Business Machines (IBM), because it means they are more backward than Amazon in the battle for the IT market cloud. The other cloud provider struggling to steal market share from Amazon cloud computing is Oracle (ORCL). As AWS has become larger, some analysts have predicted that the growth rate would slow, but the last quarter is rejected Amazon for these predictions.

Amazon has managed to exceed the expectations of growth in their cloud division despite some reports earlier this year that Apple (AAPL) has reduced its exposure to AWS by adopting some of its operations in the cloud of Google Cloud alphabet.

Growth opportunities are still very important in the field of cloud computing, because the transition of the business to the cloud is still in the early stages.

3Q16 Earnings Miss Expectations

Overall, Amazon reported EPS (earnings per share) of $ 0.52 on revenue of $ 32.7 billion in 3Q16 half. Although results improved from a year earlier, EPS missed the consensus estimate, which called for $ 0.78. consensus earnings forecast was $ 32.7 billion. Amazon is looking for revenue between $ 42 billion and $ 45.5 million in 4Q16 against the consensus estimate of $ 44.6 billion.

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