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Expert: Why Amazon's cloud is 'tremendous'

Amazon's cloud business is so "tremendous" that it will eventually overtake its retail business, Weblogs CEO Jason Calacanis said Friday.

"They keep expanding to the offering, adding new features and developers are extremely loyal to it," Calacanis told CNBC's "Squawk Alley."

Calacanis made his remarks the day after Amazon reported its cloud business accounted for $1.57 billion of its quarterly revenue, leading the stock to all-time highs. Amazon shares were up more than 15 percent in early-afternoon trading.

"We didn't expect it to be that profitable. We were expecting flatter margins and the rest of the Street was, as well," Aaron Kessler, an analyst at Raymond James told CNBC's "Squawk on the Street" on Friday.

Another important reason Amazon's cloud business will overtake its retail sector is because of logistics, Calacanis added. "Once you get into these platforms, switching is a pain in the neck, and the companies that are using it are high-growth companies, so they're not really going to switch."

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Calacanis also said the company had been very aggressive in promoting its cloud business by giving heavy discounts to users or providing them for free. "They have stopped all the discounts. They have stopped all the freebies, and that's only happened in the last year."

Amazon's 15 percent rise prodded the Nasdaq Composite to within 40 points of its all-time intraday high of 5,132.52. The index was up about 0.7 percent in early-afternoon trading. Click here to see where U.S. equities are trading now.