Cat's out of the bag! Amazon's cloud business is worth $5 billion

Amazon.com Inc’s first-quarter revenue grew more than expected as rising sales in North America and its burgeoning cloud-computing services unit offset new business investments, boosting its shares nearly 7 percent. The e-commerce company for the first time broke out financial details of its secretive cloud computing unit, Amazon Web Services, on Thursday, saying revenue jumped almost 50 percent to $1.57 billion, or about 7 percent of total revenue. The unit’s operating income grew 8 percent to $265 million. [caption id=“attachment_1151035” align=“alignleft” width=“380”]  Amazon logo. Reuters image[/caption] Amazon shares rose $26.01 to $416 in extended trading, after closing slightly higher at $389.99 on Nasdaq. Chief Executive Jeff Bezos revealed in a statement that Amazon Web Services is a $5 billion business and its growth is accelerating. “We’re putting a lot of capex (capital expenditure) there, and we think over time we will be able to generate significant free cash flow,” Chief Financial Officer Tom Szkutak said on a conference call. Cloud computing has turned out to be more lucrative than expected, Wedbush Securities analyst Michael Pachter noted. “Amazon’s Web service is profitable, and apparently was a year ago as well. Everybody thought it was losing money … and is probably a bit smaller than people thought it was.” Amazon’s sales from North America rose 24 percent to $13.4 billion in the quarter ended March 31, the company said. The company said it is continuing to build its Prime delivery business with its one-hour delivery service called Prime Now. It is also investing in original content for its Prime instant video services and devices. The international unit, which accounts for about 35 percent of total sales, remained a drag, with sales for the quarter slipping 1.77 percent to $7.75 billion. Szkutak said Amazon has stepped up its investments, particularly in India, and remains selective in China. “The growth rate in India is very rapid,” he said. “A big part of the challenge there is helping sellers to succeed and grow their online businesses.” Amazon said it expected net sales to grow 7 to 18 percent in the current quarter to $20.6 billion to $22.8 billion. It estimated an operating loss of $500 million to an operating income of $50 million for the quarter. Analysts on average were expecting second-quarter revenue of $22.11 billion, according to Thomson Reuters I/B/E/S. Amazon reported a loss of $57 million, or 12 cents per share, for the first quarter compared with a profit of $108 million, or 23 cents per share, a year earlier as it continued investing in products and services that ranged from Hollywood-style television productions to drone delivery and streaming video-calls. Revenue rose 15 percent to $22.7 billion in the first quarter. Analysts on average had expected a loss of 12 cents per share on revenue of $22.39 billion.   Reuters