Amazon just announced yet another killer quarter for its profitable cloud computing unit, Amazon Web Services.
It brought in $US3.66 billion of revenue for the first quarter, compared to $2.57 billion in the year-ago first quarter.
This remains Amazon’s most profitable business unit. Q1 profits came in at $US890 million, out of Amazon’s total operating profit of just over $US1 billion. And this was up from the year-ago quarter, when AWS reported $US604 million in operating profits.
Amazon remains the biggest, baddest cloud computing vendor in the market, on track to do way over $US14 billion in revenue this year, even if it hardly gains any more big, new customers. And it will almost certain gain many new customers.
AWS even scored a major coup this quarter when it announced that newly public Snap had signed a five-year, $US1 billion contract for AWS. Snap was born and grew up on Google’s cloud and remains one of Google’s marquee customers. So that was a big PR score for Amazon, a not-so-subtle smack at its rival, as well as a nice hunk of change.
But there’s one number in AWS’ outlook that has caused the industry pause: its “slowing” revenue growth percentage, also being referred to as its decelerating growth.
With the quarter’s record revenue of $US3.66 billion, AWS is up 43% over the year-ago quarter. That was a slight beat on what analysts had been expecting. They had been projecting 42% growth.
But it’s not as big a percentage of growth as previous quarters, which came in at 47%, 55%, and 58%, respectively.
Now, smaller growth percentages are to be expected as overall revenue continues to climb, and a $US3.66 billion business that’s still growing at over 40% is not at all in trouble.
But this metric, if it continues on the same trajectory, does mean that the cloud computing market is showing the first signs of maturing. And it also indicates that Amazon could be feeling the pressure as competitors like Microsoft, Google, and maybe even Oracle step up their game.
As Wall Street analyst Brent Bracelin, from Pacific Crest Securities, wrote in a research note earlier this week:
“We recently lowered our Amazon Web Services (AWS) estimates to account for moderating growth after heavy investments by Microsoft and Google have led to viable alternatives. We assume that revenue growth falls below 40% y/y for the first time in 1Q17 and could dip below 30% by the end of 2018.”
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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