Amazon's cloud business topped $10 billion in net sales for the first time this part quarter, the company announced when it filed its quarterly earnings on Thursday.
Amazon Web Services, the retailer's market-leading cloud platform, generated $10.2 billion in net sales this quarter, up 33% from this time last year. The same period of last year, AWS generated $7.7 billion in net sales. It was up slightly from last quarter, when AWS recorded revenue of $9.95 billion.
That said, the figure missed Wall Street analyst expectations of $10.29 billion in quarterly revenue for AWS.
Furthermore, the results show the cloud unit's weakest year-over-year revenue growth since Amazon started disclosing AWS revenue in 2015.
That could be a sign of growing competition from rivals like Microsoft and Google Cloud, as well as international players like Alibaba. Or it may be a simple result of the law of large numbers, as AWS' ever-growing revenue base makes it that much harder to show the kinds of year-over-year growth it enjoyed when it was smaller.
Ultimately, AWS remains one of Amazon's strongest units, accounting for 77% of Amazon's total operating profit for the quarter. Last year, AWS generated $35 billion in revenue for the company.
Overall, Amazon shares dropped 6% after hours after it missed Wall Street analysts' earnings expectations, although it reported a beat on revenue. Amazon's retail side has been facing demand surges, but also supply chain slowdowns.
Analysts have said they expect AWS to be able to weather and even thrive during the pandemic as increased remote work leads to more customers moving onto the cloud. While AWS may face higher strain on its infrastructure, it frequently tests its network of data centers for peak traffic.
While AWS has more name recognition as the largest cloud on the market, it can't match rivals like Microsoft and Google Cloud when it comes to offering collaboration and productivity suites like Office 365 and G Suite, respectively, which are in higher demand during the coronavirus pandemic.
Still, AWS easily outsizes its competitors in terms of revenue. Google Cloud is on track to generate about $10 billion in revenue for the entire year. Microsoft's commercial cloud business, which includes its cloud Azure and Office 365, reached $13.3 billion in sales for the quarter, although Microsoft does not break out specific numbers for Azure.
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