And though most consumers know the Seattle-based company for the deliveries it leaves on their doorsteps or the hours of streaming video it provides, the health of Amazon’s business increasingly relies on Amazon Web Services, or AWS.
AWS accounted for $604 million in operating income this quarter, compared to $588 million for its hulking North American business, which is largely comprised of its retail sales. The share is particularly staggering considering that AWS’s total sales haul was just a tiny fraction of the revenue it made from North American shoppers: Net sales for AWS were $2.6 billion in the quarter, compared to $17 billion for the North America segment. (Amazon’s international segment delivered an operating loss of $121 million.)
Investors had been watching closely for sales momentum in Amazon Web Services because of its appealingly fatter profit margins. AWS saw a robust 64 percent sales growth compared to the same period in the previous year.
Amazon’s stock popped more than 12 percent in after-hours trading as the results blew past analysts’ forecasts. Amazon’s stock has been down about 11 percent so far this year.
Amazon continued efforts this quarter to strengthen its position across several retailing categories. With the launch in March of a nightly, QVC-like streaming show called “Style Code Live,” it continued to try to make itself into more of a destination for fashionistas. And it expanded the products available for order with Dash buttons, which are small, Internet-enabled devices that can be placed in a pantry or laundry room so shoppers can stock up on items like granola bars, coffee or detergent with the touch of the button. In the so-called “Internet of things” category, it joined forces with Brita to debut a WiFi-connected water pitcher that orders new filters automatically when needed.
On a conference call with investors, chief financial officer Brian Olsavsky said an increase in selection played a key role in fueling retail sales growth in the quarter. He said that expanded assortment of merchandise was largely fueled by the company’s Fulfilled by Amazon program, in which third-party sellers store their goods in Amazon warehouses and allow Amazon to pack and ship the orders.
Amazon also recently rolled out new devices, the Echo Dot and the Amazon Tap, that use its Echo voice-activated personal-assistant software.
The e-commerce giant still faces plenty of challenges to its profitability: Its fulfillment costs, or expenses related to shipping, climbed to $3.7 billion from $2.7 billion. This is partly why the company is investing in myriad different logistics schemes, including buying its own trucking fleet and experimenting with an on-demand, Uber-like network of drivers that can make deliveries to customers’ homes.
Jeffrey P. Bezos, the chief executive of Amazon, owns the Washington Post.