Whoa: Amazon cloud sales up nearly 82% in second quarter

Amazon Web Services

The launch of Amazon Web Services in 2006 seemed a puzzling one. Why was Jeff Bezos pushing his online retail company into Web infrastructure services? ("It was a big soul-searching decision," Adam Selipsky, Amazon Web Services Vice President of Product Management and Developer Relations, told Fortune last year.) Seven years later, many companies that wholly or partly operate off AWS -- from Netflix and NASA to Pinterest -- are probably grateful he did. AWS lets many companies to offload costly, time-consuming tasks like setting up servers and managing databases, and focus on their products. Indeed, AWS may be so valuable, RBC Capital Markets managing director Mark Mahaney estimated that it generated $1.5 billion in revenues last year.

Amazon(AMZN) Web Services showed very strong sales growth in Amazon’s second quarter. Net sales for the segment were up 81.4% to $1.824 billion from $1.005 billion for the corresponding year-ago quarter. Profit in the category soared to $391 million from $77 million a year ago.

Overall, the Seattle-based e-commerce giant showed a surprise profit of 19 cents per share versus what analysts had expected to be 15-cent-per-share loss. Total sales were $23.2 billion, also beating expectations of $22.4 billion.

The market loved what it saw: Amazon shares soared 15% in after-market trading.

This is the second quarter in which Amazon broke out AWS numbers from the company’s massive e-commerce business. For the first, AWS logged $1.57 billion in sales, up 49 percent from the year-ago period. Perhaps a bigger deal—It also generated operating income of $265 million for the quarter, up from $245 million a year ago.

At that time, Amazon CEO Jeff Bezos, said in a statement that he saw AWS alone to be “a $5 billion business and still growing fast — in fact it’s accelerating.”

This quarter’s results appear to bear him out on that, even though over the past two years, two huge competitors—Google (GOOG) and Microsoft (MSFT)—have entered the public cloud arena. In this market, huge data center farms chock full of servers “rent” computing, storage and networking capabilities to customers.

On the earnings call, analysts asked if lesser price competition contributed to the healthy AWS numbers. And indeed it does seem that the round-robin of price cuts between the major players has slowed of late with some providers even hiking prices in some areas

“Pricing is certainly a factor but we don’t believe it’s necessarily the primary factor. The ability to move faster and more agile-ly [sic] is primary,” said Amazon chief financial officer Brian Olsavsky.

This story was updated during the conference call.

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