M+E Connections

Growth in Amazon Web Services (AWS) provided a major boost in revenue for Amazon during its second quarter (ended June 30) and the company continues to invest heavily in that business, according to CFO Brian Olsavsky.

“We are seeing great customer adoption” of AWS and the company saw its largest increase in revenue for that business in the quarter, both on a year-over-year and quarter-over-quarter basis, he said July 27 on an earnings call with analysts. He noted that AWS usage “in all of our large services [is] actually accelerating” and growing “at a rate higher than our revenue growth.”

Pointing to “some very big customer wins” for AWS in the quarter that included Ancestry and California Polytechnic State University, he said: “Momentum in the business is very strong.”

Amazon also continues to expand AWS availability to new regions, he said, telling analysts the company will open in “five regions in the near future,” including in France, China, Sweden, Hong Kong and a second government cloud region in the East.

AWS announced that in 2018 it will open a new infrastructure region in Hong Kong and a second GovCloud region in the U.S. AWS currently operates 44 Availability Zones across 16 infrastructure regions globally, with announced plans for another 14 Availability Zones across five AWS Regions, Amazon said in press release.

AWS revenue grew to $4.1 billion in Q2 from $2.9 billion a year ago, while AWS operating income increased to $916 million from $718 million. But AWS operating expenses grew to $3.2 billion from $2.2 billion.

Amazon has “really stepped up the infrastructure” for AWS “to match the large usage growth and also the geographic expansion,” Olsavsky said. Infrastructure in capital leases jumped 71% through the end of Q2 from a year ago, he said. Amazon marketing expenses also grew, “driven by the increases we’re seeing in the sales team both in AWS and advertising,” he said. Amazon head count grew 42% as Amazon “accelerated” the growth rate for hiring software engineers and sales teams “to support primarily AWS and advertising,” he said.

Underscoring the growth of AWS, Amazon said in its earnings release that customers had migrated more than 30,000 databases using the AWS Database Migration Service since it became generally available in 2016. That included more than 7,000 databases “in the last few months,” during which Amazon also launched “more than 400 significant AWS features and services,” according to CEO Jeff Bezos.

AWS customers also “continue to ramp their use” of Amazon machine learning and artificial intelligence services with organizations including the American Heart Association, NASA, Liberty Mutual Insurance, Vonage and Kelley Blue Book using natural language chat bots via Amazon Lex, Amazon said. AWS also announced the general availability of AWS Greengrass, software that allows customers to run AWS compute, messaging, data caching, and sync capabilities on connected devices, it said.

Total Amazon Q2 revenue grew 25% from a year ago, to $$38 billion. But profit tumbled to $197 million (40 cents a share) from $857 million ($1.78 a share) and Amazon shares were down 2.29% at $1,022 in afternoon trading July 28.