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Cloud Business Drives Amazon's Profits

This chart shows Amazon's operating profit.

Amazon announced its first quarter earnings on Thursday, beating analyst expectations across the board. The Seattle-based e-commerce behemoth reported revenue of $35.71 billion, up from $29.1 billion in Q1 2016. The company also announced a net profit of $724 million for the first three months of the year, marking a 40 percent increase over last year’s March quarter.

As our chart illustrates, Amazon’s profit is mainly driven by its highly profitable cloud business these days. Amazon Web Services (AWS), the market leader in the highly competitive market for cloud infrastructure, accounted for almost 90 percent of the company’s operating profit in the first quarter. The fact that AWS accounted for no more than 10 percent of the company’s revenue at the same time, illustrates how high the operating margin is in the cloud segment compared to Amazon notoriously low-margin e-commerce business.

For many years, Amazon had reinvested nearly every dollar it earned into its own growth. Now that the cloud segment is making so much money, it seems like even Jeff Bezos is running out of ideas to reinvest all of it.

This chart shows Amazon's operating profit.

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