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AWS Earns $3.5 Billion in Q4, Hints at Slowing Growth

By Amazon Web Services' standards, Thursday's fourth quarter Amazon.com earnings report marked a rare financial stumble, despite raking in record-high revenues.

AWS, the leader in the public cloud market by a wide margin, has consistently increased its revenues in every earnings report since Amazon.com began breaking it out as a separate line item in the first quarter of fiscal 2015. Its Q4 FY2016 earnings report was no different; AWS raked in $3.5 billion in revenue for the period, a 9.4% increase over the previous quarter.

However, year-over-year revenue growth was 47%, its slowest ever. AWS revenues for the quarter just missed analyst estimates of $3.6 billion.

Profits increased from $861 million in Q3 to $926 million in Q4, but grew by only 61% year-over-year -- practically a snail's pace considering previous quarters' triple-digit operating income growth.

Despite these signs of a possible slowdown, AWS still outperformed Amazon.com's North America and International retail segments, whose revenues grew year-over-year by just 22% and 23%, respectively.

For the full fiscal year, AWS earned a total $12.2 billion in revenue -- an increase of 55% from FY2015 -- and reported operating income of $3.1 billion. AWS comprised 9% of all of Amazon.com's revenue for the year.

Despite the unit's relatively slow growth, Amazon.com executives touted the expansion of AWS services, infrastructure and customer base in its earnings release Thursday.

"With millions of active customers, AWS continues to grow, and enterprise customers have committed to migrating tens of thousands of applications to AWS, including: Workday selected AWS as its preferred public cloud infrastructure provider for customer production workloads; Capital One selected AWS as its predominant cloud infrastructure provider; shipping carrier Matson has closed all of its data centers, completing an 'all-in' migration to AWS; McDonald's is transforming its digital-facing properties with AWS; the Financial Industry Regulatory Authority (FINRA) is going 'all-in' on AWS for their data analytics platform, which analyzes up to 75 billion market events daily; and Enel has already moved more than 5,000 servers to AWS as it transforms its technology infrastructure on AWS," the company said in a press release.

AWS significantly increased its worldwide footprint in the past year with the launch of 11 new availability zones across five regions, including the United Kingdom, Canada and South Korea. Five more availability zones split between Paris and China are also in the works for 2017.

Q4 saw the launch of 308 "significant new services and features" in AWS, the company said, with many of them -- such as the Rekognition, Polly and Lex AI solutions; the Athena serverless query service; and the expanded lineup of Snowball migration services -- seeing daylight at last fall's re:Invent conference.

In total, AWS launched a total of 1,017 new services in 2016, the company said. One of them is the Database Migration Service, which became generally available in March and has clocked over 18,000 migrations to date.

Amazon.com as a whole earned $43.7 billion in revenue for the period, falling short of Wall Street's estimated $44.7 billion. However, its earnings per share of $1.54 did exceed estimates by $0.20. Operating income for the entire company was $1.3 billion.

About the Author

Gladys Rama is the Senior Site Producer for RCPmag.com.