A couple of weeks ago Amazon announced its quarterly numbers. As has been the case over the past year or so, the numbers looked good. Really good. Derided for years as a profitless company propped up by investor largesse, Amazon grew its revenues by 31 percent, from $23.9 billion to $30.4 billion, while profits leapt 832 percent, from $92 million to $857 million.
Most of the profit came from AWS: on $2.88 billion in revenues, AWS reported $718 million in operating income. In Q216, AWS grew 58 percent year over year (YoY), down slightly from Q1’s 64 percent, but still healthy. As I wrote earlier this year, AWS’s curious failure to align with Amazon’s overall low-margin approach to pricing indicates that it is deliberately keeping prices high to avoid further increasing customer demand. Said another way, AWS’s growth is governed by capacity, not customer demand — which means we can expect it to continue its 50 percent growth rate for the next several years.