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Will Slowing AWS Hurt Amazon's (AMZN) Growth in Q1 Earnings?

AmazonAMZN is set to report first-quarter 2018 results on Apr 26.

Amazon Web Services ("AWS") has been the cash cow for the company in recent times. Its persistent efforts to open more data centers globally and lower prices lend it a competitive edge.

AWS can support workload of any size and has more than one million active customers in 190 countries. AWS launched a new region in France and a second AWS Region in China during the quarter. Globally, AWS is now accessible in 52 Availability Zones (AZs) through 18 technology infrastructure regions.

However, per Synergy Research report , AWS growth slowed in the fourth-quarter as compared with Microsoft's MSFT Azure and Alphabet's GOOGL Google. However, the report also stated that " AWS maintained its dominant position with revenues that exceeded the next four closest competitors combined, despite huge strides being made by Microsoft ."

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote

Click here to know how the company's overall Q1 performance is likely to be.

Expanding Clientele: Key Catalyst

AWS client base is strongly benefiting from its continued focus on innovation and expanding product portfolio. Expanding customer base has been driving AWS net sales, which totaled $5.11 billion and accounted for 8.5% of total net sales. The figure surged 44.6% from the year-ago quarter.

Notably, AWS is more profitable than Amazon's retail business. AWS operating income surged 46.2% year over year to $1.35 billion (63.3% of total operating income) in the last quarter.

We expect AWS to deliver impressive results driven by its low cost service offerings, expanding clientele and partner base. The Zacks Consensus Estimate for AWS revenues is pegged at $5.24 billion.

Amazon's customer base expanded in the quarter with the addition of GoDaddy. Amdocs DOX also formed a strategic collaboration with AWS, which will enable the former to develop solutions that would help the service providers to adapt better to the digital world in a cost-effective way.

Notably, the emerging trend of machine learning and artificial intelligence, adoption rate of Amazon SageMaker, Amazon Machine Images and AWS DeepLens has increased. Currently, 10K customers are using AWS machine learning services. Amazon Aurora has also gained rapid traction, which will boost top-line growth in the to-be-reported quarter.

Currently, Amazon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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