Friday, April 24, 2015

Amazon Reports Earnings for AWS

Amazon reported quarterly earnings yesterday.  For the first time, the company split out financials for its Amazon Web Services (AWS) business.  That unit provides cloud computing services.   Amazon indicated that AWS generated $1.57 billion in revenue and $265 million in operating income for the quarter.  Overall, Amazon reported revenue of $22.72 billion and a net loss $57 million for the company as a whole.  Amazon continues to argue that they are investing for the future, thereby explaining the continuing escalation of expenses and yet another net loss. 

Clearly, losses in the retail business are more substantial than previously thought.  AWS appears to be profitable, while the company as a whole lost money.  The earnings reports raises a few questions for me, inquiries that I believe many investors and analysts will be putting forth in the coming months.  
  • Has Amazon been reluctant to split out financials for AWS because they know that it may cause more questions to be asked about the profitability (or lack thereof) of the core retail business?   
  • Are the continuing losses related to investments and expenses that will eventually create a high profit retail business, or are those costs associated with many diverse lines of business that have been launched?  
  • Is Amazon spreading itself too thin with so many strategic moves in a wide variety of areas?  
  • Perhaps most importantly, what is the strategic logic for keeping AWS and Amazon's retail business together?  Will some investors begin to argue for a breakup at Amazon?

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