Amazon’s cloud computing unit logged $4.1 billion in sales in the second quarter, up nearly 42% from the same period a year earlier.
That puts the division, Amazon Web Services, on track for $16 billion in revenue for this year, CFO Brian Olsavsky said on Thursday.
That’s a juggernaut, especially for a business that just a few years ago was viewed as a loss leader for the retail giant. AWS had $916 million in operating income in the latest quarter, up nearly 28%. It also marks impressive sales growth at a time when Microsoft (MSFT) and Google (GOOG) have been pouring resources into their own rival cloud computing businesses.
While taking those big numbers in stride, analysts on a call with Amazon executives on Thursday pointed out that operating margins for AWS have fallen over the last four quarters. Operating margin is an important measure of a company’s profit after costs are deducted. For this quarter, AWS’ operating margin was 22.3%, down from 24.3% in the first quarter, and 26.2% in last year’s fourth quarter.
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In response to a question from RBC analyst Mark Mahaney, Olsavksy noted that operating margins tend to fluctuate quarterly based on spending on data center infrastructure and other expenses over time. Amazon (AMZN) plans to add five more data centers this year in China, France, Sweden, Hong Kong and the U.S. One of these massive data center farms can easily cost more than $1 billion.
And, while 42% is a healthy growth rate, that metric fell for the eighth consecutive quarter, as CNBC pointed out.
Amazon’s shares fell nearly 3% to $1015.40 per share in after hours trading on Thursday. That means that Amazon founder and CEO Jeff Bezos, who was briefly the world’s wealthiest person earlier in the day based mostly on his huge remaining stake in his company, is now back to No. 2 after Microsoft co-founder Bill Gates.
Note: (July 28, 2017 8:36 a.m. ET.) This story was updated to add more on AWS growth rate.