AWS sees revenue and income rise but Amazon fails to hit expectations

AWS sales boost comes after Microsoft and Google reported surge in revenues for Azure and GCP earlier this week

AWS shone a ray of light through parent company Amazon's disappointing financials in Q3.

The tech giant's cloud unit had more operating income than the company as a whole.

Revenues for AWS swelled 39 per cent year on year to $16.11bn.

AWS' operating income was also up 38 per cent to $4.88bn for the quarter.

Amazon CEO Andy Jassy said the vendor intends to strike while the iron is hot in its cloud business, including plans to open eight more infrastructure regions.

They include a $5.3bn investment in a New Zealand Region for three new Availability Zones by 2024.

"Customers have appreciated this commitment, which is part of what's driving this past quarter's AWS growth acceleration." Jassy said.

However, despite bringing in around 15 per cent of its parent company's total revenues, shares fell by more than four per cent as Amazon failed both to meet Q3 expectations and issued disappointing fourth-quarter guidance.

Amazon's revenues hit $110.8bn in Q3, up 15.2 per cent year on year, but beneath the $111.81bn target Wall Street had been anticipating.

Q4 guidance

Jassy also warned investors that the firm anticipates ongoing supply chain constraints to damage earnings in Q4.

As a whole, Amazon's Q4 guidance is that it expects fourth-quarter revenues of between $130bn and $140bn.

"We've always said that when confronted with the choice between optimising for short-term profits versus what's best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic," he said.

However, he appealed to partners to be patient.

"In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer Business as we manage through labour supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs…

"It'll be expensive for us in the short term, but it's the right prioritisation for our customers and partners."

AWS - Amazon's golden unit

In an earnings call transcribed by Seeking Alpha ,CFO Brian Olsavsky was quick to turn investor's attention back to its cloud unit saying the company's board is confident that AWS will continue to log healthy growth.

"AWS has seen a reacceleration of revenue growth as customers have expanded their commitment to the cloud and selected AWS as the cloud partner," he said.

"We feel really good about the acceleration and growth. We know there was some suppression last year, but the growth last year was still in the 28 per cent to 33 per cent range…through most of the year."