AWS pumps up Amazon earnings

28.01.2016
Just minutes before the close of the stock market on Thursday Amazon’s stock shot up almost 9% to close the day at $635 per share. Investors were giddy about the company’s forthcoming earnings news.

As soon as the market closed the company’s financials were released. And investors were disappointed.

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Amazon did just fine; revenues rose 22% compared to the same time period a year earlier to $35.75 billion. Analysts were predicting closer to $35.9 billion.

Profit, which is something that Amazon used to ignore quarter after quarter, was $1 per share. Analysts had predicted it would be more than $1.50 per share.

So the stock tumbled. Just before 5 PM ET, less than an hour after the financials were released, Amazon’s stock was down more than 10% in after hours trading.

Here’s the dirty little secret though: If it had not been for Amazon’s cloud juggernaut, those financials could have been a lot more ugly.

AWS continued it meteoric growth. Revenue for the full year rose to $7.88 billion. It’s on track for a $10 billion annual run rate. AWS profits were $1.86 billion for the year.

Take away that AWS profit and that EPS drops like a rock.

One has to wonder if investors will wise up to the reality that AWS is propping up Amazon earnings and call for AWS to be spun out as a separate company.

(www.networkworld.com)

Brandon Butler