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Why AWS is Important for Amazon's (AMZN) Earnings in Q4
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Amazon.com (AMZN - Free Report) is set to report fourth-quarter 2017 results on Feb 1. Amazon Web Services (AWS) is expected to deliver impressive results driven by its low-cost service offerings, expanding partner base and dominant market share.
AWS continues to be the cash cow for Amazon. The segment can support workload of any size and has more than one million active customers in 190 countries. Globally, AWS is now accessible in 46 Availability Zones (AZs) through 17 technology infrastructure regions.
In the third quarter, AWS net sales (10.5% of total net sales) surged almost 42% from the year-ago quarter and 11.8% sequentially to $4.58 billion. The Zacks Consensus Estimate for AWS revenues is pegged at $4.98 billion.
Moreover, AWS generates higher margins than retail. In the third quarter, segment operating income surged 36% year over year and 27.8% sequentially to $1.17 billion.
Click here to know how the company’s overall fourth-quarter performance is expected to be.
Dominant Market Share, Innovation Drives Growth
Amazon’s persistent efforts to open more data centers globally and lower prices lend it a competitive edge. Per Synergy Research Group’s third-quarter 2017 report, AWS fared better than its next five largest competitors combined in the cloud market. The list includes Microsoft (MSFT - Free Report) , IBM, Google and Alibaba (BABA - Free Report) .
Moreover, according to Synergy Research Group’s latest report, cloud services and infrastructure revenues grew 24% on an annualized basis over the four quarters ending September 2017. IaaS & PaaS services had the highest growth rate at 47%, which bodes well for AWS.
We are optimistic about the functionality, partner ecosystem and the experience AWS offers, which are likely to lead to continued customer wins. During the fourth quarter, AWS was selected by Time-Warner’s Turner division as its primary cloud provider. The company also expanded partnership with VMware.
At its re:Invent annual conference, Amazon launched a number of product offerings including Amazon Sumerian. The service is designed to make it easier for developers to build virtual reality, augmented reality and 3D applications for an array of platforms and devices.
Amazon also introduced five new AWS Elemental Media Services — MediaConvert, MediaLive, MediaPackage, MediaTailor, and MediaStore — in the event.
China Expansion: Key Catalyst
Further, AWS expansion in China through partnership with Ningxia Western Cloud Data Technology Co. Ltd. (“NWCD”) and the launch of the second data center are a positive. Notably, AWS China (Beijing) Region is operated by Sinnet.
However, the region is highly competitive with the presence of Microsoft, which already operates a pair of cloud regions in China. The company has data centers in Shanghai and Beijing. Additionally, homegrown technology titans like Tencent and Alibaba also offer cloud computing services.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Why AWS is Important for Amazon's (AMZN) Earnings in Q4
Amazon.com (AMZN - Free Report) is set to report fourth-quarter 2017 results on Feb 1. Amazon Web Services (AWS) is expected to deliver impressive results driven by its low-cost service offerings, expanding partner base and dominant market share.
AWS continues to be the cash cow for Amazon. The segment can support workload of any size and has more than one million active customers in 190 countries. Globally, AWS is now accessible in 46 Availability Zones (AZs) through 17 technology infrastructure regions.
In the third quarter, AWS net sales (10.5% of total net sales) surged almost 42% from the year-ago quarter and 11.8% sequentially to $4.58 billion. The Zacks Consensus Estimate for AWS revenues is pegged at $4.98 billion.
Moreover, AWS generates higher margins than retail. In the third quarter, segment operating income surged 36% year over year and 27.8% sequentially to $1.17 billion.
Amazon.com, Inc. Revenue (TTM)
Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote
Click here to know how the company’s overall fourth-quarter performance is expected to be.
Dominant Market Share, Innovation Drives Growth
Amazon’s persistent efforts to open more data centers globally and lower prices lend it a competitive edge. Per Synergy Research Group’s third-quarter 2017 report, AWS fared better than its next five largest competitors combined in the cloud market. The list includes Microsoft (MSFT - Free Report) , IBM, Google and Alibaba (BABA - Free Report) .
Moreover, according to Synergy Research Group’s latest report, cloud services and infrastructure revenues grew 24% on an annualized basis over the four quarters ending September 2017. IaaS & PaaS services had the highest growth rate at 47%, which bodes well for AWS.
We are optimistic about the functionality, partner ecosystem and the experience AWS offers, which are likely to lead to continued customer wins. During the fourth quarter, AWS was selected by Time-Warner’s Turner division as its primary cloud provider. The company also expanded partnership with VMware.
At its re:Invent annual conference, Amazon launched a number of product offerings including Amazon Sumerian. The service is designed to make it easier for developers to build virtual reality, augmented reality and 3D applications for an array of platforms and devices.
Amazon also introduced five new AWS Elemental Media Services — MediaConvert, MediaLive, MediaPackage, MediaTailor, and MediaStore — in the event.
China Expansion: Key Catalyst
Further, AWS expansion in China through partnership with Ningxia Western Cloud Data Technology Co. Ltd. (“NWCD”) and the launch of the second data center are a positive. Notably, AWS China (Beijing) Region is operated by Sinnet.
However, the region is highly competitive with the presence of Microsoft, which already operates a pair of cloud regions in China. The company has data centers in Shanghai and Beijing. Additionally, homegrown technology titans like Tencent and Alibaba also offer cloud computing services.
Zacks Rank & Key Pick
Amazon has a Zacks Rank #3 (Hold).
PetMed Express (PETS - Free Report) is a stock worth considering in the same sector. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>