Amazon Web Services: Reading the financial tea leaves

One of the more interesting lines of Amazon's earnings report was the "other" line, which largely includes Amazon Web Services such as S3 and EC2. Reading the tea leaves it appears that Amazon's side ventures are gaining momentum.

One of the more interesting lines of Amazon's earnings report was the "other" line, which largely includes Amazon Web Services such as S3 and EC2. Reading the tea leaves it appears that Amazon's side ventures are gaining momentum.

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Unfortunately, tea leaves are all we have. Amazon Web Services (AWS) isn't material to the company's earnings yet at 3 percent of the company's total revenue, but the growth indicates that it will be at some point.

By the numbers, Amazon's "other" revenue, which includes AWS (all resources), was $111 million in the first quarter ending March 31, up 43 percent from $78 million in the year ago quarter. In North America, "other" revenue was $95 million. The North America revenue in the "other" category could largely be attributed to AWS.

It's not clear what else is lumped into the other revenue category with AWS, but management hinted that the company's nascent unit is attracting enterprise customers.

On Amazon's earnings conference call, Amazon CFO Thomas Szkutak said:

"Other is a combination of a number of things, including some of our Amazon enterprise services, certainly web services would be a part of that as well, and so again there's a number of things that are included in that."

That's about all you'll get on AWS' financial details. But analysts appear to be taking the bait. Bank of America analyst Brian Pitz noted that AWS should improve the company's profit margins--a big worry today--in the future. Pitz also added that the initial investment AWS seems to be over. Now all Amazon has to do is grow AWS and land more customers.