Cloud and advertising sales give Amazon a bumper quarter

Moves closer to trillion dollar valuation

Amazon posted record earnings for the second quarter on Thursday. The retail and cloud giant exceeded analysts' expectations reporting a quarterly profit of $2.5 bn. A year ago profits were just $179 million.

Revenues over this period were $52.9 bn, slightly below Wall Street expectations.

Despite pressure from the likes of Microsoft Azure, the AWS cloud continues to grow rapidly. Amazon reported $6.1 bn worth of cloud sales compared to $4.1 bn last year. This figure was slightly above expectations of $6 bn and represents a 49 per cent year-on-year increase.

"It's really becoming the crown jewel of Bezos' empire," GBH Insights analyst Daniel Ives told Reuters. "They've invested significant dollars in building out the infrastructure, sales force and AWS partner ecosystem worldwide that I think now is starting to pay just massive dividends."

Like-for-like comparisons between public cloud providers are difficult, but research firm Canalys calculates that AWS has 31 per cent of the cloud market, Microsoft 18 per cent and Google eight per cent.

Amazon Prime Day on 16 July saw members purchase 100 million items with a record number of new members joining the company's loyalty club in one day. Sales from that event will be included in the Q3 figures.

Amazon also made strong inroads in ad sales, with this source of revenue growing 132 per cent to $2.2 bn, again slightly ahead of experts' estimates. Ads on Amazon are placed directly in front of people with an interest in buying meaning they can be highly targeted. The company is working to automate the processes around ad placement and the measurement of results.

"A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising," CFO Brian Olsavsky said on media call. "We've seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing."

The company's stock is valued at around $900 bn - although due to its complexity analysts disagree on exactly how to value the firm. Apple is worth about $50 bn more, with the two tech firms in a race for the prize of a trillion dollar valuation.