Solid AWS Momentum in Cloud Space to Aid Amazon's Q1 Earnings

Zacks Equity Research

Amazon’s AMZN cloud dominance is expected to contribute to first-quarter 2019 results which are scheduled to be released on Apr 25.

Amazon’s cloud computing division, Amazon Web Services (AWS), has become an integral to the company since AWS generates significantly higher margins compared with its retail business.

This can primarily be attributed to popularity and growing adoption rate of AWS, due to its strong cloud services offerings. Further, AWS offers strong discounts for long-term deals which help it in attracting customers.

All these factors have been accelerating AWS revenues which came in at $ 7.43 billion, accounting for 10.3% of the net sales of Amazon in the last reported quarter. We further note that AWS operating income soared 60.8% year over year to $2.18 billion.

Click here to know how Amazon’s overall first-quarter performance is likely to be.

Portfolio Strength to Aid Q1

Amazon’s persistent efforts toward expansion of its service portfolio are likely to aid AWS’ performance in the quarter under review.

During the to-be-reported quarter, the company unveiled centralized backup service, AWS Backup, which offers customers automatic and continuous data backup to meet business and regulatory requirements.

AWS acquired CloudEndure, which offers recovery services for cloud data during cyberattacks. Notably, this diversifies the company’s offerings by adding disaster-resilient services.

In the first quarter, AWS also introduced Amazon DocumentDB, a document database service that is compatible with MongoDB applications and tools. It offers scalability and availability to customers which in turn aid in management of critical MongoDB workload.

Further, the company made its new storage class, Amazon S3 Glacier Deep Archive, available to customers. Notably, this storage class provides secured storage service for durable object that aid in long-term retention of rarely accessed data.

In addition to this, AWS made, Concurrency Scaling, a new feature of its scalable data warehouse, Amazon Redshift, available to customers.

Amazon.com, Inc. Revenue (TTM)

 

Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote

AWS Dominance to Benefit Amazon in Q1

Per a report from Synergy Research Group, AWS continued to lead the cloud market in fourth-quarter 2018 with 34% share despite increasing competition from Microsoft MSFT, Alphabet’s GOOGL Google Cloud and Alibaba’s BABA cloud platform which are striving to decrease the gap.

We believe strengthening key offerings by AWS are expected to aid its dominance in the cloud computing space in the first quarter as well.

During the quarter under review, AWS continued to win customers on the back of its enhanced services, high performance rate and rapid deployment ability.

Companies like Choice Hotels, Gogo and Lyft selected AWS for running their entire infrastructure and workloads. Further, Standard Bank Group, Guinness Six Nations Championship and Clippers CourtVision have chosen AWS as their preferred cloud provider, thanks to its robust cloud computing, AI, ML, Deep Learning (DL) and data analytics techniques.

Consequently, expanding clientele is expected to drive the top line of AWS in the to-be-reported quarter. The Zacks Consensus Estimate for AWS net sales is pegged at $7.7 billion, up 110.4% from the year-ago quarter.

Currently, Amazon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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