Sunny earnings from cloud computing
Amazon, Microsoft and Alphabet credit the relatively new line of business for boosting financial results.
SEATTLE — The moneymaking machines at the core of Amazon, Microsoft and Alphabet, the parent company of Google, are notably different. But the respective kings of online retailing, software and internet search should all credit a relatively new line of business for lifting their financial results.
In their quarterly earnings reports Thursday, the three said cloud computing — through which they rent computing services and online access to software hosted in their data centers — was growing faster than their larger, older businesses.
The impact of cloud computing was particularly noticeable at Amazon, the leader in this stillyoung business. The profit Amazon can make on cloud-comput- ing services is significantly bigger than in its retail sales, and that has helped turn the Seattle company from a consistent money-loser to a respec table moneymaker.
For the first quarter, which ended March 31, Amazon said its total net income rose to $724 million, or $1.48 a share, from $513 million, or $1.07 a share, a year ago. The company said the $890 million in operating income from its cloud business, called Amazon Web Services or AWS, accounted for most of its overall profits.
The worry, however, is that this cannot last forever, not with Microsoft and Google making big investments in their own cloud businesses while trying to undercut Amazon with lower prices.
That has not happened — at least not yet. While AWS revenue grew at a slower pace than in the past, it still rose a healthy 43 percent to $3.66 billion. The company’s shares rose 1 percent in after-hours trading.
“There’s always this moment when people think, ‘Is the magic going to run out?’” said James McQuivey, an analyst at Forrester Research. “It just hasn’t panned out.”
Microsoft — the No. 2 player in cloud computing — is steadily making the transition to that business, relying less and less on personal computer software, the company’s mainstay for decades.
Microsoft’s Azure cloud hosting business grew by 93 percent from the year-earlier quarter. And the cloud version of its productivity software Office 365, sold to companies as an online service, grew by 45 percent.
“We’re seeing continued strong demand for our commercial cloud-based services,” Amy Hood, Microsoft’s chief financial officer, said in an interview.
For Alphabet, cloud efforts are catching on, although it trails far behind Amazon and Microsoft. Alphabet does not break out cloud revenues, but its “Google other revenues” segment, which includes the cloud, jumped 49 percent from the first quarter 2016.