The Seattle Wars: Who Will Win The Cloud?

Amazon (Nasdaq: AMZN) recently reported its fourth quarter results that beat analyst estimates. However, AWS, its cloud segment failed to impress analysts.

Amazon’s Financials

Amazon’s fourth-quarter revenues grew by 20% to $72.4 billion. Net income increased from $1.9 billion or $3.75 per share a year ago to $3 billion or $6.04 per share. Analysts expected earnings of $5.56 per share on revenue of $71.9 billion. Operating income increased to $3.8 billion, compared with $60.5 billion a year ago.

By segment, net product sales increased 8.2% to $44.7 billion and net service sales increased 45% to $27.7 billion.

AWS revenues grew 45% over the year to $7.4 billion, missing estimates of $7.29 billion. AWS generated operating income of $2.1 billion. According to the latest Synergy Research Group report, AWS remains the leader of the public cloud infrastructure space with about 35% market share in Q4. Microsoft is a distant second with a 15% share, followed by Google Cloud and IBM Cloud neck to neck at 7%.

Revenue from subscription services like Prime increased by 25% to $3.95 billion. Revenue from online stores grew 13% to $39.8 billion while revenue from physical stores, chiefly from its stores from the Whole Foods acquisition, was down 3% to $4.4 billion. Revenue from third party seller services including commission, fulfillment, and shipping fees grew 27% to $13.3 billion.

Other revenue mainly from advertising grew 95% to $3.4 billion. Despite the drastic increase, Amazon still has a long way to go before it catches up with advertising leaders Google and Facebook. Facebook’s Q4 advertising revenues grew 30% over the year to $16.64 and Google’s Q4 advertising revenue grew 20% over the year to $32.64 billion.

Amazon’s international sales grew by 15% to $20.8 billion. However, losses narrowed 30% from $919 million to $642 million while North America reported net sales of $44.1 billion, up 18.2% and operating income of $2.2 billion, up 33%.

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