Since its launch in 2006, Amazon’s cloud business has seen 52 price cuts in total, making it one of the most economical options in the market.
But don’t be surprised if you see even more discounts, Amazon’s CFO Brian Olsavsky said during the company’s earnings call on Thursday.
“Our price reductions are a core part of our philosophy,” Olsavsky said. “We are comfortable with price decreases.”
Olsavsky’s comments indicate the biggest cloud providers, like AWS, Google, and Microsoft, will likely continue to play the price-war game that’s been driving prices down to near zero. Microsoft is offering deep discounts to its enterprise customers to convince them to switch over to its Azure cloud service, while Google is known for offering low prices in hopes of adding new users.
What’s perhaps most striking is that AWS continues to report fat margins, despite all the discounts, while Azure and Google cloud are estimated to be hugely unprofitable. In the most recent quarter, AWS was the most profitable business at Amazon, bringing in $861 million in operating income, more than double last year’s $428 million, at a solid 26% margin. AWS revenue jumped 55% year-over-year, its largest ever, to $3.23 billion.
That likely means AWS is gaining more users and adding even more services that customers are willing to pay for, so customers would spend more over time.
“There’s going to be a lot of winners in this space but we are very happy with our position and the customer reception to our products,” Olsavsky said.
When asked what’s driving AWS’s success, Olsavsky repeated his comments from last quarter, narrowing it down to the following three factors:
- Functionality and pace of innovation: AWS has already added more new features and services this year than it did last year, when it added 722.
- Partner and customer ecosystem: AWS struck a big partnership deal with VMware last quarter, making it more attractive for customers looking for a “hybrid” option. It also signed a huge deal with Salesforce in the quarter before.
- Experience: AWS has been in the cloud business longer than anyone else. In fact, AWS CEO Andy Jassy told us there’s even an internal expression about this: “There’s no compression algorithm for experience.”
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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