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AWS Revenue Balloons by 80 Percent in Q3

Amazon Web Services' blockbuster growth continues apace.

Its parent company, Amazon.com, reported its third-quarter financial results on Thursday. Overall, the retail giant just exceeded analysts' expectations, reporting $25.36 billion in revenue for the quarter (a year-over-year increase of 23%) and earnings per share of $0.17. Operating income amounted to $406 million.

The standout line item, however, was AWS. Although it earns much less per quarter than Amazon.com's e-commerce arms, the cloud is the company's fastest-growing segment.

For the quarter-ended Sept. 30, AWS racked up $2.09 billion in revenue, a whopping 78% increase from the $1.17 billion it earned over the same period last year. (For comparison, Amazon.com's North America division grew 28% year over year, and its International division by 7%.)

AWS revenue is also up quarter-to-quarter by 15% from $1.82 billion in Q2.

So far in 2015, AWS has garnered revenue of $5.47 billion, up from $3.22 billion reported for the first nine months of 2014.

Operating income for AWS in Q3 was $521 million, a quarter-to-quarter increase of 33% and a year-over-year increase of 353%. Operating margin was 25%.

At the re:Invent conference earlier this month, AWS Senior Vice President Andy Jassy noted that AWS was set to become a $7 billion business this year, although Thursday's earnings report now gives it a run rate of over $8 billion.

The company announced a slew of major new products and services during the conference in a bid to expand its 1-million-plus user base, some of which were highlighted in Amazon.com's earnings, including a BI platform called QuickSight and an IoT development platform called AWS IoT.

In its Q3 earnings call, Amazon.com executives credited these product announcements for AWS' growth. "We're continuing to see great acceleration in the pace of innovation" in AWS, said Amazon.com CFO Brian Olsavsky in response to a question.

Olsavsky noted that besides lowering AWS costs eight times in the past year, the company has also rolled out 530 "significant new features," including the Aurora database, which has become the fastest-growing AWS service since its release in July.

"We believe that we're adding new services and features at a rate faster than many others," he said, adding that AWS' growth is indicative of customers responding favorably to these changes.

Microsoft, whose Azure cloud platform is one of AWS' few major competitors, also released its quarterly earnings report on Thursday. Microsoft's Intelligent Cloud business unit earned $5.89 billion for its Q1, although the company did not specify how much of that amount comes from Azure and how much from its server products, which are also included in that category.

Microsoft did say that "Azure revenue and compute usage more than doubled year-over-year" and that its commercial cloud business now has a run rate of $8.2 billion, putting it roughly on par with AWS.

About the Author

Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.

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