Amazon's Q1 Signals Competitive Pressures For AWS

Amazon.com, Inc. AMZN's first-quarter results came in better than expected, which boosted shares higher by more than 3 percent. But not all among Wall Street were impressed with the report and the company's outlook.

Trip Chowdhry of Global Equities Research commented in a research report that Amazon's AWS revenue grew 43 percent year-over-year in the quarter, which marks a deceleration from a 47 percent growth rate in the prior quarter. Meanwhile, operating margins for AWS fell from 26.2 percent in the prior quarter to 24.3 percent in the most recent quarter.

Competitive Pressure

Chowdhry noted Microsoft Corporation MSFT's competitive platform to AWS, called Azure, saw its revenue soar by 93 percent. The analyst noted Microsoft's platform is "differentiating" itself on deep learning and machine learning giving it an advantage over AWS. Other competitors include Oracle Corporation ORCL, which has "become smart" with its database platform, while Alphabet Inc GOOG GOOGL is a "the wild card," as customers use it to negotiate pricing with other cloud providers.

Chowdhry believes Amazon's report signals AWS will continue to face competitive pressures moving forward. In fact, the analyst slashed his AWS growth rate from a prior range of 40 to 46 percent to a new range of 30 to 35 percent off a revenue base of $13 billion.

At last check in Friday's pre-market session, shares of Amazon were up 3.28 percent at $948.48.

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