AWS contributes 13 per cent of Amazon's sales, but 50 per cent of profit

Vendor's cloud wing continues to be main profit driver despite growth slowdown in Q1

Amazon Web Services (AWS) was responsible for half of the vendor's overall operating income in its first quarter of the year.

The vendor's cloud arm saw its operating income grow 59 per cent to $2.2bn (£1.7bn), up from $1.4bn in the same period in 2018.

Amazon's net sales grew 17 per cent to $59.7bn in Q1, its slowest growth since Q1 of 2015.

AWS' net sales also experienced a slower growth rate of 41 per cent to $7.7bn, compared with the 49 per cent growth it experienced in the same period last year.

Cloud rival Microsoft reported its slowest revenue for its Azure offering in 11 quarters earlier this week.

Amazon CFO Brian Olsavsky acknowledged this decelerating growth, stating that the first half of 2019 is going to be tougher based on last year's high growth in Q1 and Q2.

"This is always going to be a lumpy business," he told analysts on an earnings call transcribed by Seeking Alpha.

"It's not only dependent on us, it's also dependent on the companies that are adopting AWS.

"So there are differences in sales cycles. There are differences in adoption of the cloud. There are differences in migration patterns that will make any quarter-to-quarter movements lumpy. So we're happy with the growth."

The CFO reiterated comments he made on a previous earnings call that the vendor was still reaping the rewards of heavy investment in 2016 and 2017, adding that this investment model would see a return this year.

This was emphasised by Amazon setting its second-quarter guidance in the range of $2.6bn to $3.6bn for Q2, well below the $4.2bn that analysts were expecting.

"We have some really, really impressive gains and efficiencies in both the warehouses and also the datacentres," Olsavsky elaborated.

"Every percentage utilisation in our datacentres is worth tens and more millions of dollars. So again, that's a big part of our model. It is not only investing, but also working on efficiencies, adding new products and features for customers.

"And as we lower costs, we pass those along to customers, either through new rates or new deals that we have.

"Moving forward, it will be increasing as we move through the year. And that will be a constant battle between growth, geographic expansion in AWS and also efficiencies to limit how much we actually need."