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AWS pumps up Amazon earnings

Brandon Butler | Jan. 29, 2016
If it had not been for Amazon’s cloud business, its earnings could have been a lot more ugly.

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.

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.


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