Amazon Posts Fourth-Quarter Profit As Cloud-Computing Revenue Climbs
Amazon shares jumped 13 percent in after-hours trading on news that the company returned to profitability in the fourth quarter. Strength in the cloud-computing business was an especially bright spot.
Cloud computing means hiring a company such as Amazon to run your computer system remotely instead of managing all those machines and software in-house.
Amazon and rivals such as Microsoft have been spending a lot to build big computer server farms. In spite of that expense, IDC analyst Al Hilwa says it’s an attractive business for Amazon.
"They still make a lot more money on it than typically is made in retail," he said.
Amazon doesn’t break out its cloud-computing revenue, but it lumps it into a category called “other.” That category was Amazon’s fastest growing segment in the fourth quarter, climbing 41 percent. One of Amazon's fiercest rivals in cloud computing is Microsoft, which earlier this week said its cloud revenue more than doubled in the December quarter.
Changing IT Environment
Hilwa says Amazon and Microsoft are capitalizing on companies that don’t want the headache of managing their own computer systems.
“As the IT environment sort of commoditizes more and more then there’s little reason to want to differentiate by running your own operations or email or things like that that are pretty generic," Hilwa said. "Honestly, the cloud providers are increasingly providing better service than a lot of internal IT organizations are."
Overall, Amazon's net income declined 10 percent to $214 million, or 45 cents a share, from $239 million, or 51 cents, a year earlier. Revenue rose 15 percent to $29.3 billion.