A massive 45% growth in the revenue of Amazon’s Web Services (AWS) in the fourth quarter has been fuelled by big profits in Amazon’s public cloud arm.

Beats Microsoft & Google In Cloud Infrastructure

The $7.4 billion cloud revenue, which is a jump 45% compared to the previous year, means that AWS is beating competitors Microsoft and Google in the market for cloud infrastructure.  These are the services that businesses and organisations use to outsource their computing and data storage needs.

To give some idea of the scale of the jump in revenue for AWS, these figures mean that it generated more operating income during 2018 than its North American retail operations and that AWS generated the revenue through $25.65bn in sales (compared with the $141.3bn from North American retail operations).

Central To Success

The operating income for AWS in the quarter was $2.18 billion, accounted for 58% of Amazon’s overall operating income, although there was a slight decrease in AWS’s operating margin.

This means that the cloud business has become central to Amazon’s success in terms of revenue and profits.

More Cloud Regions

Amazon purchased two more new cloud computing regions online in 2018, and it says that it plans to open four new regions and 12 new availability zones within those regions by the first half of 2020.

The company widened its base of cloud customers last year, including some big-name sign-ups such as Santander, Korean Air and Amgen.

Not Fastest Growing

Even though AWS has seen significant growth in revenue, Microsoft’s cloud business is growing even faster.  For example, Azure cloud revenue grew by 76% in the latest quarter.

It is, however, perhaps to be expected that the revenue growth rate of a fast-growing company drops off as their revenue base swells e.g. AWS’s has dropped from 78% in 2015 to 42% during the third quarter of 2017.

What Does This Mean For Your Business?

Amazon is clearly a company that has grown very quickly and has diversified (far) beyond its online roots into many areas, including bricks-and-mortar stores (groceries and books), self-service stores in the US, and healthcare, as well as experimenting with innovative new ways to gain an edge in its core business e.g. drone and robot parcel deliveries.  Amazon’s Alexa virtual personal assistant technology and Echo voice-controlled devices have also proven to be very popular in the marketplace.

It hasn’t all been plain sailing though, with the company’s business practices coming under more scrutiny from UK, US, and EU regulators, as well the UK government.

In the business cloud market, AWS is showing strong growth in what is a highly profitable sector as more businesses look to outsource to the cloud, but many market analysts now predict slowing growth and higher spending for Amazon as it tries to compete and fight competitor challenges on many diverse fronts.