Amazon Shows Investors Stronger Profits; Cloud Business Gives A Boost

aamznShares of Amazon jumped 17 percent in afterhours trading on Thursday after the Seattle-based company posted stronger than expected 2nd quarter earnings, boosted by its growing cloud business.

Although Amazon is seeing more e-commerce competition from Wal-Mart and new startup Jet.com, the company is still finding new ways to entice shoppers to shop with new offerings like Prime Day which occurred on July 15th.

For the quarter, net sales grew 20 percent to $23.18 billion, compared with $19.34 billion in the second quarter of 2014.

Amazon’s net income was $92 million in the second quarter, or $0.19 per diluted share, compared with a loss of $126 million in the second quarter of 2014.

North America revenue grew 26 percent to $13.8 billion. World-wide revenue grew 20 percent to $23.18 billion.

Although Amazon is widely known for its retail e-commerce business, the company is growing its revenue from its cloud business with Amazon Web Services (AWS).

In the Amazon Web Services (AWS) segment revenue increased 81 percent to $1.82 billion.

Amazon Senior VP and CFO Brian Olsavsky explained during the conference call that Amazon recently announced plans to expand Amazon Web Service in India and “double down” on its investments for growth in its fastest growing geography.

Amazon has plans to set up data centers in India next year to develop an infrastructure that will equip the company to meet the growing demand for cloud computing.

Amazon is lowering prices to gain a competitive advantage over its rivals including Microsoft, IBM, Google, and Salesforce.

Olsavsky acknowledged that Amazon has offered numerous price cuts this year.

“We’ve had multiple price cuts this year. We are now up to 49 since launch in 2006, so it is a fundamental part of our business model” Olsavsky said.

For next quarter, Q3 2015, Amazon expects net sales of between $23.3 billion and $25.5 billion, or growth of between 13 percent and 24 percent.

-Johnathan Schweitzer

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