Jeff Bezos decided after nine years it was finally time to disclose the financial results of his pioneering cloud business, Amazon Web Services.
And so, along with its first quarter results, Amazon (AMZN) disclosed that the AWS unit had revenue of $1.6 billion, up 50% from last year, and operating income of $265 million, up a more modest 8% amid growing competition from Microsoft (MSFT), Google (GOOGL) and others.
“Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating,” Bezos crowed, referring to the unit's annualized run rate, in a statement accompanying the release.
Amazon shares jumped as much as 7% in volatile trading after the results came out on Thursday afternoon. That comes on top of gains of 26% so far this year, as investors are again excited about growth opportunities for the e-commerce giant.
The stock surge wasn't just about the cloud, however. Amazon also forecast second quarter operating income of as much as $650 million excluding the cost of stock-based compensation. That was much higher than most analysts had been assuming for what is typically a slow quarter for the company. Last year, Amazon reported a loss of $15 million in second quarter operating income.
The forecast ignited hopes that 2015 would be a year when Bezos decided to emphasize profits over investments, a "show me the money" year for investors.
The cloud business disclosure had competitors rushing to compare themselves to the market leader, but with considerably less transparency. IBM (IBM) said its cloud businesses had annual revenue of $7.7 billion, up 75% but the category includes a grab of products and services, some well beyond the basics that Amazon offers.
Microsoft too, lumps its Azure unit that competes head-on with AWS into a grab bag category that includes Office 365 subscriptions and a customer relationship management software offering. It cited an annualized revenue rate of $6.3 billion, with quarterly revenue up 106%.
Neither firm revealed operating income, expenses or margin, as Amazon did.
Most analysts were close to the $5 billion revenue figure in their guesses but virtually none expected to see profits. Cloud is viewed as a cut throat-market dominated by frequent cost cutting. But AWS hasn't cut prices in months, and competition may be shifting to other critical factors like reliability and software features.
Overall, Amazon reported first quarter revenue of $22.7 billion, up 15% from last year and ahead of analysts' estimates of $22.4 billion according to FactSet. Revenue would have increased 22% if not for the strength of the U.S. dollar against other currencies, Amazon said. The company lost $57 million, or 12 cents per share in the quarter, also better than the 14 cent loss analysts expected.