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Web services push Amazon revenues up; posts profit

October 26
12:26 AM 2015

The world's largest online retailer has posted encouraging performance for the third quarter ending September 2015. The higher sales in the US and cloud computing business pushed its bottom line to swell. Amazon announced profits for the consecutive second month. Adding to this, the cost control measures and expanding beyond online marketing helped Amazon perform better. Amazon Web Services (AWS) propelled Amazon's overall revenues to grow further.

The Seattle-based online retailer, computing and entertainment company has been spending huge amount on its expansion plan, while focusing on cost control. Amazon has developed extensive warehouse network, license video content, etc, as part of its efforts to expand beyond online marketing. 

Amazon Web Services has over one million active customers in 190 countries. AWS recorded robust sales performance during the third quarter as its net sales grew encouragingly 78 percent to $2.09billion during the quarter.

Brian Olsavsky, Chief Financial Officer, Amazon, said on a conference call that "the balance between investing and cost controls will be lumpy over time. The company would continue to invest in areas that work with customers, even though investments would remain very high, Amazon would be looking for ways to cut costs."

Amazon announced profits for the second straight quarter. The online retailer has posted $79mn profit for the quarter. While keeping controls on costs, Amazon reinvested every dollar it earned into the business. Indicating widest gap in the past three years, the operating expenses were up 18 percent when compared to revenues growth of 23 percent.

The One-Day shopping sale in July for Prime shipping member alone added two percent to the revenues, according to Olsavsky. Amazon offered more discounts than Black Friday during one-day shopping. 

The $500mn revenues more than expected brought cheer to investors. After the quarterly results, Amazon shares rose 11 percent taking the market capitalization by $25bn to $260bn. Amazon's monetizing of revenues boosted investors' confidence, said market analysts.

The revenues are expected to surpass $100-bn mark this year for the first time. However, despite growing revenues, profits are minimal. This is because reinvesting the money earned back into business. Amazon built up over 100 fulfillment centers across the world and invested heavily in emerging markets such as India. Amazon is also strengthening video content and cloud computing and Amazon Web Services.

Cloud computing is fast growing business for Amazon and it's continuously investing in Internet of Things (IoT). Amazon is successfully capitalizing on rising demand for storing and managing huge amounts of data information.

Sales in North American markets rose 28.3 percent to $15.01bn during the third quarter. There's increasing demand for electronics and general merchandise in the North American market. 

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