profits into the business
Technology giant Amazon has said its web services business
generated sales of $1.57bn (£1.04bn) in the first quarter of
the year and is profitable.
Amazon Web Services (AWS) is a cloud computing offering
that makes money by charging businesses to host websites
and other applications.
Amazon founder Jeff Bezos said in a statement : "Amazon web
services is a $5bn business and still growing fast."
The firm's total revenues for the quarter rose by 15% to
$22.7bn.
The increase was stronger than expected, with revenues
buoyed by increased sales in North America, Amazon's biggest
market. Despite the rise, the company reported a loss of $57m
for the quarter.
Shares in the firm rose nearly 5% in after-hours trading.
The AWS division provides cloud computing services to
household names including Dropbox, Spotify, Netflix, Uber,
Samsung and even the CIA - helping them send notifications,
stream video and synchronise data.
The figures for the first time confirm that Amazon's cloud
business is the biggest of its kind in terms of revenue.
Analysis: Leo Kelion, technology news editor, BBC Online
On the conference call one of the analysts expressed surprise
at the scale of the margins enjoyed by Amazon Web Services.
The division posted $265m of operating income in the first
quarter, which was not only higher than last year's figure, but
more importantly not the loss that several analysts had
expected.
Even so, Amazon made clear that its business model for AWS
was to innovate quickly and then pass cost savings onto
customers in order to remain the dominant player.
Recent AWS add-ons include Amazon Machine Learning - a
service that automatically analyses clients' data to help them
reduce their customer churn and a feature that makes it easier
for developers to run "internet of things" apps.
Last year AWS' chief told the BBC that the unit could in time
become bigger than Amazon's retail business.
But with Microsoft, Google and IBM among rivals seeking to
eat into its market share, the question is whether those
margins will hold up over the long term.
More from Leo: Amazon's bid to power the internet
'Surprisingly profitable'
The profitability of the cloud business could soothe investors,
who have been anxious for the firm to turn a profit and stop
investing in new projects, which has seen them move into
tablet computers, smartphones, and a short-lived nappy
service.
AWS "was surprisingly more profitable than forecast", Dan
Kurnos, an analyst at the Benchmark Company, told the BBC.
That "should help [Amazon] justify their heavy investment
spending and provide a clearer path to profitability for the
[overall] company as AWS grows," he added.
Michael Pachter, from Wedbush Securities said: "I think most
of us believed that the business [AWS] was breakeven at best,
and it is surprising that it generates such a significant portion
of profit."
"The stock is up because it is clear that if that business
scales, Amazon can be immensely profitable," he added
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