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Less-Profitable Web Services Contributes to Amazon's Q2 Earnings Miss

E-commerce giant Amazon AMZN just released its second-quarter fiscal 2017 financial results, and as one of the largest companies in the S&P 500, it has significant market-moving potential. Amazon made its name as an online shopping marketplace, but one of the most notable aspects of today’s report was the latest data from Amazon Web Services.

(Also Read: The Complete Guide To Everything Owned By Amazon)

Web Services is a collection of enterprise-level platforms designed for websites and companies that can’t afford the time or money it takes to develop their own server farms. In other words, AWS provides cloud-based storage and templates for companies to quickly boost their computing capabilities.

Launched a decade ago, AWS has really exploded in popularity over the past few years. Last quarter, Amazon reported AWS segment revenues of $3.661 billion—an increase of 43% year-over-year on a constant currency basis.

According to Amazon’s just-released report, AWS revenues totaled $4.100 billion in the second quarter. This marks growth of about 42% sequentially and 12% sequentially. This is just about in-line with recent growth rates, which means Amazon has been able to maintain its impressive momentum here.

Interestingly, segment operating income increased just 27.6% to $916 million. Segment operating margin was down about 10% to 22.3%, and since AWS is a key driver of Amazon’s profit, this could be a reason for the company’s massive earnings miss.

Overall, Amazon posted earnings of $0.40 per share, which missed the Zacks Consensus Estimate by more than a dollar.

Make sure to check back later for more commentary on the growth of Amazon Web Services!

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