Amazon Web Services: Cloud unit that powers the internet helps online retailer get record profits

The company has long been likened to the online equivalent of a shopping centre - but it might be more like the infrastructure business that keeps the whole internet going

A worker keeps the flow of boxes for delivery moving in the shipping department at Amazon's distribution center in Phoenix, Arizona November 22, 2013 (REUTERS/Ralph D. Freso )

Amazon has announced huge, and very important, profits.

The results could overturn two of the central assumptions about Amazon: that it’s essentially a shop who happens to sell its things online, and that it tends to avoid making profits so that it can continue to grow.

The first assumption is partly already overthrown, by the huge help that Amazon’s Web Services gave to the overall results. Though the company is known for its shop, easily its most profitable business is AWS - which sells server space and other infrastructure to companies so that they can host themselves on the internet.

Just as the company essentially acts as a go between for shops to connect with customers, creating a retail infrastructure online, the web services business hires out computing power and internet tools for other companies. A company might opt to buy Amazon's storage to back up their information, for instance, or researchers might temporarily borrow Amazon's hugely powerful computers to do a particularly hard piece of calculation.

It started ten years ago but it is quickly on its way to becoming the business that keeps Amazon in its huge profits. It sales were up 64 per cent in the latest results, taking it to $2.57 billion.

That’s dwarfed by the sales across the rest of the business, which altogether is about ten times bigger than AWS. But it is hugely profitable, making 67 per cent of Amazon’s income.

It will continue to grow, Amazon’s CEO Jeff Bezos has said, and the company is likely to make more and more profit from that growth as it does so.

Beyond web services, a large part of Amazon’s business isn’t actually charging people for stuff - but charging them to send them that same stuff. It’s focusing more and more on Prime, the premium membership service that signs people up for a yearly fee.

The company doesn’t say exactly how many people are part of the service, but does say how quickly it’s growing. Membership was up 47 per cent in 2015, it said, and analysts say that people who join it tend to generate more profits for Amazon because they buy more.