Amazon posts second straight profit powered by Web Services

Thu Oct 22, 2015 5:58pm EDT
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By Anya George Tharakan and Alexandria Sage

(Reuters) - E-commerce company Inc (AMZN.O: Quote) on Thursday recorded a surprise profit for the second quarter in a row, propelled by higher sales in North America and its cloud computing business, and its shares rose 11 percent.

Amazon, which has historically struggled with profitability while spending to expand beyond its core online marketplace offerings, reined in costs and was helped to profitability by growth at its Amazon Web Services (AWS) segment.

Chief Financial Officer Brian Olsavsky told reporters on a conference call that the balance between investing and cost controls "will be lumpy over time."

Olsavsky said the company would continue to invest in areas that work with customers, adding that even though investments would "remain very high" Amazon would be looking for ways to cut costs.

Net sales from Amazon Web Services, which has more than 1 million active customers in 190 countries, rose more than 78 percent in the quarter to $2.09 billion.

    "There are questions about what's the sustainable margin for this? Are we seeing just a hyper growth phase now? But for right now, AWS is driving the train, and it's going to for the near future," said BGC Partners analyst Colin Gillis.

Analysts on a separate conference call asked Amazon about its forecast for long-term margins on AWS, but the company provided no figures.

Cloud computing is the fastest growing business for Amazon, and the new services in which it is investing, such as Internet of Things, will help the company capitalize on rising demand to store and manage large amounts of information.   Continued...

The new Amazon Fire TV is displayed during a media event introducing new Amazon products in San Francisco, California September 16, 2015. REUTERS/Beck Diefenbach