Amazon cloud revenue jumps 45 percent in fourth quarter

Key Points
  • Amazon Web Services gave Amazon $5.11 billion in revenue, above analysts' estimates.
  • While AWS leads the cloud market, Microsoft Azure's 98 percent revenue growth rate exceeded Amazon's 44.6 percent growth rate.
Amazon Web Services CEO Andy Jassy speaks at the 2017 AWS re:Invent conference in Las Vegas.
Jordan Novet | CNBC

Amazon's cloud business generated more revenue than analysts expected in the fourth quarter, with sales surging 45 percent.

The financial results strengthen the case that Amazon Web Services has grown into a cash machine for its parent company, while Alibaba, Google, IBM, Microsoft and Oracle all try to catch up.

AWS captured $5.11 billion in revenue in the quarter and $17.46 billion in all of 2017, Amazon said in its quarterly earnings statement on Thursday. Analysts on average expected $4.97 billion, according to FactSet.

AWS now has a revenue run rate of over $20 billion, CFO Brian Olsavsky said during Amazon's conference call with analysts after the earnings release.

Operating income at AWS rose to $1.35 billion for the quarter, topping the FactSet estimate of $1.27 billion.

Almost a dozen years after becoming available, AWS has come to be a significant contributor to its parent company. In the fourth quarter of 2014, almost 5 percent of Amazon's revenue came from AWS. In the fourth quarter of 2017, that figure was about 8.5 percent. Across all of 2017, approximately 10 percent of Amazon's revenue resulted from AWS.

"There are few enterprise franchises that are operating at an annual run rate approaching $20B in scale yet still delivering high growth in excess of 40 percent," KeyBanc analysts led by Edward Yruma wrote in a Jan. 28 note.

But in addition to developing its revenue capability, AWS has also been gradually delivering more and more operating income to Amazon, which provides capital for additional investments, especially outside North America. In the fourth quarter AWS operating income equated to more than 60 percent of the operating income for the entirety of Amazon.

In the quarter, AWS launched services for translation and transcription, revealed a camera for developers that's capable of doing artificial intelligence computations, and announced data centers just for U.S. intelligence agencies. In November AWS CEO Andy Jassy boasted that the public cloud now offers customers more than a hundred services.