Amazon’s AWS continues to lead its performance highlights

Amazon’s web services AWS continue to be the highlight of the company’s balance sheet, once again showing the kind of growth Amazon is looking for in a new business for the second quarter — especially one that has dramatically better margins than its core retail business.

Despite now running a grocery chain, the company’s AWS division — which has an operating margin over 25 percent compared to its tiny margins on retail — grew 49 percent year-over-year in the quarter compared to last year’s second quarter. It’s also up 49 percent year-over-year when comparing the most recent six months to the same period last year. AWS is now on a run rate well north of $10 billion annually, generating more than $6 billion in revenue in the second quarter this year. Meanwhile, Amazon’s retail operations generated nearly $47 billion with a net income of just over $1.3 billion (unaudited). Amazon’s AWS generated $1.6 billion in operating income on its $6.1 billion in revenue.

So, in short, Amazon’s dramatically more efficient AWS business is its biggest contributor to its actual net income. The company reported earnings of $5.07 per share, compared to analyst estimates of around $2.50 per share, on revenue of $52.9 billion. That revenue number fell under what investors were looking for, so the stock isn’t really doing anything in after-hours, and Amazon still remains in the race to become a company with a market cap of $1 trillion alongside Google, Apple and Microsoft.

This isn’t extremely surprising, as Amazon was one of the original harbingers of the move to a cloud computing-focused world, and, as a result, Microsoft and Google are now chasing it to capture up as much share as possible. While Microsoft doesn’t break out Azure, the company says it’s one of its fastest-growing businesses, and Google’s “other revenue” segment that includes Google Cloud Platform also continues to be one of its fastest-growing divisions. Running a bunch of servers with access to on-demand compute, it turns out, is a pretty efficient business that can account for the very slim margins that Amazon has on the rest of its core business.

Google Cloud’s LA region goes online

Google Cloud’s new region in Los Angeles is now online, the company announced today. This isn’t exactly a surprise, given that Google had previously announced a July launch for the region, but it’s a big step for Google, which now boasts five cloud regions in the United States. It was only three years ago that Google opened its second U.S. region and, while it was slow to expand its physical cloud footprint, the company now features 17 regions around the world.

When it first announced this new region, Google positioned it as the ideal region for the entertainment industry. And while that’s surely true, I’m sure we’ll see plenty of other companies use this new region, which features three availability zones, to augment their existing deployments in Google’s other West Coast region in Oregon or as part of their overall global cloud strategy.

The new region is launching with all the core Google Cloud compute services, like App Engine, Compute Engine and Kubernetes Engine, as well as all of Google’s standard database and file storage tools, including the recently launched NAS-like Cloud Filestore service. For businesses that have a physical presence close to L.A., Google also offers two dedicated interconnects to Equinix’s and CoreSite’s local LA1 data centers.

It’s worth nothing that Microsoft, which has long favored a strategy of quickly launching as many regions as possible, already offered its users a region in Southern California. AWS doesn’t currently have a presence in the area, though, unlike Google, AWS does offer a region in Northern California.