Amazon.com stock dipped below the psychological $1,000 per share milestone last week, as investors questioned the company’s outlook. AWS, meanwhile, turned out to be a knight in shining armor.
One that accounted for more than 100% of the total operating profits, while contributing just 10% of Amazon’s total revenue.
This chart from Statista illustrates the point, showing that despite a 25% increase in sales during the second quarter, now at $38 billion, Amazon’s net income fell a notable 77% from a year ago, to just around the $197 million mark.
What this metric means is that the numbers came in a surprising 72% short of what analysts were expecting, but not out of the ordinary considering the company’s history of prioritizing long-term growth over near-term profit.
But that did nothing to stop investors continue to question Amazon.com after this earnings shortfall.
The company’s business is split into its two main units — e-commerce and cloud services.
And while the former comes with notoriously low margins, the highly lucrative Amazon Web Services segment is a high margin business that happens to lead the market in the continuously expanding cloud infrastructure space.
Ultimately, this raises its own set of questions that Amazon will need to answer sooner rather than later.
Questions like how the company plans to boost profitability even further, and how it will tackle the sustained competition from others in the cloud game like Microsoft, Google, and IBM.