Amazon, flush with cash, says it will let you peek inside AWS' pants

Plans to break out numbers for cloud biz for first time this year


Amazon left smiles on investors' faces on Thursday following a fourth-quarter earnings report that trounced analysts' estimates.

While Wall Street was expecting to see earnings of $0.17 per diluted share, the actual figure came in at $0.45 per share – which, while not as good as the $0.51 per share that Amazon earned in the fourth quarter of 2013, was still a pleasant surprise.

The fourth quarter is always a busy one for Amazon, given the holiday shopping season, and this was no exception. Revenues for the three months ending on December 31 were $29.33bn, a 14.6 per cent increase over the year-ago period.

The business was strongest in North America, where sales were up 22.3 per cent, to $18.75bn. International sales, on the other hand, were only up 3.2 per cent.

Total sales for fiscal 2014 were $89bn, up 19.5 per cent from 2013, with the strongest growth similarly happening in North America.

Amazon was particularly keen to point out the success of its Prime loyalty program during Thursday's earnings report. Although the online retailer raised the price of Prime by 25 per cent in 2014, worldwide paid membership reportedly grew by 53 per cent in 2014, on what Amazon guardedly describes as "a base of tens of millions."

"Prime is a one-of-a-kind, all-you-can-eat, physical-digital hybrid – in 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video," Amazon CEO Jeff Bezos said in a statement. "We'll continue to work hard for our Prime members."

And yet it still made a net loss. HOW CONVENIENT

While Prime is an important word for Amazon, however, most investors prefer a different P-word: profit. And here, once again, Amazon failed to impress. The firm posted net income of $214m for the fourth quarter, which was actually down 10.5 per cent from the year-ago period. And for fiscal 2014 it posted a net loss of $297m. But Amazon investors should be used to such paltry income figures by now.

More interesting to your humble Reg hack are the fortunes of Amazon Web Services (AWS), the e-tailer's cloud services sideline. Total revenues for the company's "Other" reporting item – which encompasses AWS and some other odds and ends – were $1.74bn for the fourth quarter, a 41 per cent year-on-year increase. The figure was similarly up 42.3 per cent on an annual basis, with Other revenues reaching $5.6bn for all of fiscal 2014.

Amazon certainly isn't slowing down on AWS expenditures, either. It spent $1.14bn on purchases of property and equipment in the fourth quarter – a 30 per cent year-on-year increase – most of which likely went to building out its massive data centers.

By comparison, cloud rivals Microsoft and Google spent $1.49bn and $3.55bn on capital expenditures, respectively, during the same period.

Microsoft listed revenues of $2.59bn for its "Commercial Other" reporting item – where it books sales of its Azure cloud – in its most recent quarter, and Google reported "Other revenues" of $1.95bn in its own Q4. But each company obscures its actual cloud sales figures beneath numerous other items, making their actual cloudy cash flows hard to estimate.

That may soon change, though. In a conference call with financial analysts on Thursday, Amazon CFO Tom Szkutak said the firm plans to finally start breaking out the numbers for AWS in its earnings reports later this year.

"We just think it's an appropriate way to look at our business in 2015," Szkutak said. ®

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