Amazon’s Prime dominance sparks another record quarter

Amazon reported another surge in revenue for its cloud business last quarter, though the growth is slowing as the division gets bigger. Investors sent the stock up more than 2 per cent in after-hours trading.

A dedicated promotional “Prime Day” on 12 July is also expected to help drive sales of between $31.0bn and $33.5bn for the current quarter.

Among Amazon’s individual business segments, its Amazon Web Services (AWS) cloud computing services segment enjoyed a strong quarter, posting net sales of US$2.89 billion, up from US$1.82 billion year-on-year, with operating income of US$718 million up from US$305 million.

The e-commerce market is expected to grow by 13% in the USA this year to almost $400 billion, and Amazon remains the dominant player, according to research firm eMarketer.

Thursday, Amazon announced its second quarter sales, reporting a net income of $857 million, which makes the $92 million the company earned in its second quarter in previous year look like pocket change. Net income was $857 million, compared with $92 million in the year-ago period.

Prior to the earnings release, the Street had forecasted the e-commerce juggernaut to post earnings of $1.11 on revenues of $29.55 billion.

Amazon also recently introduced a thinner, lighter Kindle e-reader and said it was set to debut three new pilots of comedy programs on its Internet streaming service.

AWS, Amazon’s cloud computing platform used by companies as big as Netflix and Spotify, continues to grow.

Amazon.com, Inc. (NASDAQ:AMZN) will report its earnings for the second quarter of fiscal year 2016 after markets close today. AWS – which now accounts for 10 percent of sales, compared with 8 percent of past year – saw its sales grow 58 percent. In contrast to companies such as Walmart, which compete on price, Amazon is competing on convenience and customer service, both of which Prime offers in abundance. The company doesn’t disclose numbers on Prime subscribers; in a research note last month, Sanford Bernstein estimated that Amazon has between 58 million and 69 million Prime members worldwide.

After years of investing in Prime and AWS – resulting in years of thin profits or losses for Amazon – both businesses finally appear to be paying off handsomely. And it’s the most revenue AWS has ever captured in a quarter.

The Seattle, Washington-based company is up 42.27% year-over-year, compared with a gain of 2.75% in the S&P 500.