AWS is bringing in nearly $2bn in quarterly revenues

AWS revenue for the second quarter of this year topped $1.82bn, an increase of about 81 per cent year on year. The results come as other major IT service providers revealed strong cloud growth for the quarter.

Last quarter, the first time it pulled the curtain back on its cloud business, Amazon revealed AWS raked in $1.57bn in revenue. Operating income for Q2 increased 407 per cent to $391m.

Commenting on the results Amazon chief executive Jeff Bezos said “[we] continued to double down on our fastest growing geography — India, launched 350 significant AWS features and services so far this year, ahead of last year’s pace, introduced AWS Educate, and entered into agreements for new solar and wind farms — enough to exceed our 2016 goal of 40 per cent renewable energy.”

Speaking to analysts this week Amazon’s chief financial officer Brian Olsavsky said the company is also getting more competitive on cost as it continues to optimise its services.

“We had over 350 significant new features and services and we believe that’s what resonates with customers. While pricing is certainly a factor we don’t believe it’s always the primary factor; in fact what we hear from our customers is that the ability to move faster and more agility is what they value,” he explained.

But he deflected questions about the capital intensity of the AWS business – which represent about 80 per cent of its overall capex.

“We do realise it’s a capital-intensive business and we have modelling that shows it’s going to be a very good business for us and that’s what we aim for as long-term return on invested capital and free cash flow. So, we’re certainly cognizant of the capital part of the calculation,” he said.

Amazon revealed the results as other large incumbents pulled back the curtain on their cloud performance. The second quarter saw Microsoft grow its cloud revenues 88 per cent and IBM 60 per cent.

But the results suggest some of the smaller cloud providers are being left in the dust. According to John Dinsdale, chief analyst and research director at Synergy Research Group, quarterly cloud infrastructure service revenues (including IaaS, PaaS and private & hybrid cloud) are now approaching the $6bn, while trailing twelve-month revenues hitting close to $20bn. Synergy estimates AWS, Microsoft, IBM and Google (the ‘big four’) control well over half of the worldwide cloud infrastructure service market.

“The cloud infrastructure services market is quite clearly bifurcating with a widening gap between the big four cloud providers and the rest of the service provider community,” Dinsdale explained. “Developing the necessary global hyperscale datacentre infrastructure along with the required marketing and operations support is simply beyond the reach of all but a very small number of players. This is not going to change.”

The good news for smaller and medium-sized cloud providers, he said, is that there does remain a wealth of opportunity for them to specialise in a particular niche industry or geography. At the moment the firm reckons North America accounts for over half of the worldwide cloud services market, followed by the EMEA and APAC regions.