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Amazon AWS Cloud Margins Show Improvement

Microsoft CFO Amy Hood

Amazon CFO Brian Olsavsky

Amid another massive quarter of revenue, Amazon Web Services (AWS) grew its margins as well, the cloud services giant hinted during an earnings call yesterday.

The AWS margin clues come at a key time — particularly since Microsoft CFO Amy Hood described growing Azure cloud margins during that company’s earnings call earlier this month. Google, by contrast, did not specifically discuss Google Cloud Platform revenues or margins during that company’s earnings announcement earlier this week — though the company’s Google Cloud Next 2018 conference generated massive buzz in recent days.

Amazon Web Services: Customer Adoption

Amazon’s overall sales were $52.9 billion in Q2 2108, up 39 percent from Q2 2017 — but the real story involved earnings growth that easily beat Wall Street’s expectations.

CEO Jeff Bezos emphasized a global push to make Alexa-enabled devices ubiquitous worldwide. But the earnings statement also included dozens of AWS business, technology, partner and customer milestones.

Overall, AWS reported $6.1 billion in quarterly revenue — up 49 percent and easily beating analyst expectations of $5.9 billion, SeekingAlpha says.

Key AWS adopters, according to the company include:

  • Ryanair and Epic Games have gone all-in on AWS;
  • zulily is moving its infrastructure to AWS to further enhance the online shopping experience for customers;
  • 21st Century Fox chose AWS for the vast majority of its workloads to create a consistent set of digital media capabilities across its brands;
  • Verizon and its subsidiary Oath selected AWS as its preferred public cloud provider;
  • Major League Baseball named AWS its official provider for machine learning, artificial intelligence, and deep learning; and
  • Formula One is moving the vast majority of its infrastructure from on-premises data centers to AWS and standardizing on AWS’s machine learning and data analytics services to accelerate its cloud transformation.

AWS Database Migration Service: Amazon also is crowing about database migration wins. In its second year of availability, the AWS Database Migration Service has now managed more than 80,000 database transitions, the company says. The migration service largely targets legacy Oracle on-premises customers, though Amazon didn’t mention Oracle by name as part of the migration milestone statement.

Amazon Web Services: Margin Clues

For Amazon’s most recent quarter, the standout metrics for the overall company included profitability and margins, according to an earnings call question and comment from Bank of America/Merrill Lynch analyst Justin Post.

In response, Amazon CFO Brian T. Olsavsky essentially confirmed that AWS has growing margins — though he didn’t pull back the curtain on specific figures.

Some of the company’s most profitable areas included AWS and advertising, he indicated. Moreover, Amazon saw “probably better-than-expected efficiencies in operations, our infrastructure costs, and generally all of our fixed costs,” Olsavsky added.

On the data center cost front, Olsavsky said:

“You’ll note that in the first half of the year capital leases were flat year-over-year, although we’re up 20% for the full trailing 12 months, in the last 6 months it’s been pretty flat as the team has really worked well to plan our data centers run our data centers more efficiently, even to meet again increasing usage at our customers; usage rates are exceeding our growth rate.”

AWS vs Azure, Google for Top MSPs

Generally speaking, AWS had an early lead over Microsoft Azure and Google Cloud Platform on the partner front — particularly in terms of MSP partners. (Find the Top 50 MSPs for AWS here.) But the gap appears to be closing.

Microsoft recently unveiled the Azure Expert MSP partner program. And Google celebrated numerous MSP partner milestones during this week’s Google Cloud Next conference in San Francisco.

Related Survey & Research: Top MSPs for AWS, Microsoft Azure & Google Cloud Platform

We’ll be ranking the top MSPs across AWS, Azure and Google later this year. The survey for that research is here.

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