AWS to the rescue with 3Q revenues of $16.1B

Amazon Web Services (AWS) came to the rescue of parent company Amazon in the third quarter. The retail giant reported lower-than-expected third-quarter profit and revenue but its AWS cloud business saw its revenue jump 39% to $16.11 billion, which was better than analyst estimates of $15.48 billion.

“AWS has seen a re-acceleration of revenue growth as customers have expanded their commitment to the cloud and selected AWS as their cloud partner,” said Amazon CFO Brian Olsavskey on the earnings call with investors.

AWS reported an operating profit of $3.5 billion, which was an increase of 38% from the same quarter in the previous year.  It was also higher than the 37% increase in operating profit that AWS reported in the second quarter.  That profit for the quarter offset what would have otherwise been a loss for Amazon in the third quarter. AWS also generated $4.88 billion in operating income, which was up 38%.

AWS’ revenue makes up 14.5% of Amazon’s total revenue of $110.8 billion. And for the first time ever, revenue from AWS, advertising, third-party seller services and Prime subscriptions ($55.9 million) surpassed revenue from Amazon’s retail and product sales ($54.9 billion). 

Olsavsky said that some customers such as Zoom and Disney experienced a boom in 2020 while others such as travel and entertainment companies had much less demand for AWS services last year, but that has changed. “A lot of customers accelerated their journey to the cloud,” he said, adding that AWS has signed more customers from a lot of different industries.

He also noted that customers are flocking to AWS for its machine learning services. “We've been investing in this area for several years, offering an extensive set of machines learning services, including ones that can be applied to common business problems, like Amazon Connect for contact center intelligence, or Amazon Kendra for intelligent enterprise search,” he said.

AWS has been actively courting the telcos for their business and was selected by Dish Network to host the company’s RAN and 5G core in the cloud.  It also works closely with Verizon on its 5G edge network. AWS CEO Adam Selipsky, who replaced Andy Jassy when Jassy became CEO of Amazon earlier this year, told FierceWireless in June that the company sees 5G as a big opportunity.

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Overall Amazon reported net sales of $110.8 billion in the third quarter, an increase of 15% from the same quarter in 2020. Operating income dropped to $4.9 billion, compared to $6.2 billion in the third quarter of 2020.

All cloud services are booming

Analyst firm Gartner ranks AWS as the leader in the public cloud market with about 41% market share. Microsoft is second with $19.7% share and Google Cloud is fourth (after Alibaba) with 6.1% market share.

The other two U.S.-based cloud providers also saw a big increase in their business in the quarter. Microsoft Azure saw its revenue rise to $17 billion, an increase of 31% from the same quarter a year ago and Alphabet’s Google Cloud division reported $5 billion in revenue in the quarter, an increase of 45% from the same period in the previous year.