Amazon cloud profit up 3x, so stock plummets. Wait, what?

Amazon Jeff Bezos
Credit: James Duncan Davidson (cc:by)

Jeff Bezos can’t believe it, either

Amazon Web Services profits triple, yet the stock takes a hammering. Actually, it makes complete sense—here's why...

Amazon increasingly looks like a cloud company with a failing retailer attached. AWS is the consistent profit engine that props up the books 'n' gizmos side of the house.

In IT Blogwatch, bloggers bite Bezos.

curated these bloggy bits for your entertainment.


What's the craic? Shaun Nichols cards the wool, with Investors furious that Amazon only made $482m last quarter:

Amazon is taking a beating on Wall Street as the retail and cloud giant posted numbers...short of analyst expectations.

However, Amazon noted large gains in key areas, including the AWS cloud services. ... AWS revenues of $2.4bn were up from $1.4bn a year ago. ... AWS operating profit was $687m, $240m higher.

For the full year...AWS revenues...were $7.88bn, compared to a 2014 annual haul of $4.64bn. ... AWS profit [was] $1.86bn; last year...just $660m.


So what's the Street kvetching about? Lucas Matney offers Amazon Tanks 13% After Reporting Q4 Miss With $1.00 EPS:

Amazon plummeted as much as 13%...after the stock had soared to end up nearly 9%...preceding the earnings.

Diluted earnings [were] $1.00 per share. The street was expecting...$1.56 per share.

[But] AWS grew 69% YoY to $2.4 billion, beating street expectations.

Amazon Web Services is...the company’s major profit generator and accounted for a great deal of the stock growth in 2015 [although the] retail division still accounts for more than 90% of its business.


Yikes. Tiernan Ray guns for Bezos, with Amazon.com Drops 14%: [You're fired -Ed.]

Revenue...rose to $35.7 billion, yielding EPS of $1. Analysts had been modeling $35.9 billion in revenue and $1.55 per share.

Operating income rose 88% to $1.1 billion, though that was below consensus for $1.25 billion.

For the current quarter, the company sees...operating income once again look[ing] light, with a projected range of $100 million to $700 million.


Could we cut to the chase, please? Dan Frommer obliges—Amazon Web Services is now an $8 billion-a-year cloud-computing machine:

The AWS division...represented about 40% of Amazon’s fourth-quarter...income, despite only generating 7% of the company’s sales.

Another way of looking at it: AWS generated about two-thirds as much operating income...as Amazon’s entire North America e-commerce business ($1 billion).


But Bezos's punishment-by-stock-price "is how it should be." At least, according to flyingtoastr:

The ridiculous valuations and P/E ratios that Amazon has enjoyed for years have been based the fairy tale that Amazon could turn large profits on their expanding volume at some undefined point in the future.

It was a bubble, based on no actual hard earnings and instead on promises that eventually the profits will come. This...has been a long time coming.

Sales don’t matter. Profits do.


You have been reading IT Blogwatch by , who curates the best bloggy bits, finest forums, and weirdest websites… so you don’t have to. Catch the key commentary from around the Web every morning. Hatemail may be directed to @RiCHi or itbw@richi.uk.
Opinions expressed may not represent those of Computerworld. Ask your doctor before reading. Your mileage may vary. E&OE.

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