Amazon throws down the gauntlet with detailed AWS earnings

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By breaking out details about sales and expenses of its cloud business, Amazon is daring other cloud kingpins to do the same

For the first time since Amazon launched AWS back in 2006, the company has broken out the income and expenses from the cloud services division in its quarterly earnings report.

With that move, Amazon sends a message to its cloud rivals and its investors. If Amazon can talk explicitly about AWS earnings (and losses), why shouldn't other cloud giants be upfront about revenues from their cloud infrastructure services?

Short answer: It all depends on what you mean by "cloud."

By breaking out specific numbers, Amazon partly counters critics who have questioned its stated strategy of "long-term, sustainable growth in free cash flow per share" over GAAP accounting profits. 

The numbers for Amazon's latest quarter were decent. The report, which also retroactively detailed last year's numbers for AWS, revealed that AWS racked up $1.57 billion in sales, with $265 million in profit (up slightly from $245 million for the same period last year). While AWS was profitable last quarter, Amazon as a whole lost $57 million -- sharply down from the $108 million profit in the same quarter last year.

Spotlighting AWS on Amazon's balance sheet allows the company to draw attention to the division's solid profitability. It's a strong signal to other companies with cloud divisions that they'd be wise to do the same, especially if cloud operations become a bigger part of their businesses.

But no two companies are the same -- especially not in terms of why they have cloud divisions or how they monetize them.

Microsoft, for instance, freely mixes its Azure, Office 365, SaaS, and Dynamics CRM results in financial reports as "cloud revenue," with a total estimated haul of $6.3 billion for 2015. It's less clear what portion of that business constitutes Azure, as Business Insider noted, making it more difficult to draw a direct comparison between one company's cloud infrastructure business (as opposed to SaaS) and another's.

For Microsoft, that approach may help it stand out. The company has been pitching its cloud offerings as all of a piece, with Azure the fabric that unites them in a way that's genuinely useful to businesses. But tying together local and remote Azure-powered resources -- promising as it sounds -- is still a work in progress. In the short run, most people think of Azure alone as being Microsoft's cloud business, since it maps most directly to what Amazon and the others do.

Google is also opaque with its financial reports. Apart from ad revenues, the other line items in its financial report are "websites," "Network Members' websites," "advertising revenues," and "other." That "other" line includes all of its cloud computing offerings and amounted to $1.75 billion for the quarter. But it also includes enterprise applications like Google for Work, as Yahoo Finance pointed out. As a result, it's tough to tell where most of Google's 23 percent year-over-year growth came from.

What about IBM? It commands a slightly larger slice of the overall cloud pie than Google, but pinning down its cloud-specific revenues is also tough, as IBM's balance sheet doesn't break out cloud explicitly either. The closest thing IBM offers to a detailed number was in the statement, "We exited the quarter with an annual as-a-service run rate of $3.8 billion, that’s up a billion and a half in the last year." As-a-service could refer to anything from Rackspace to Bluemix, so knowing where the growth really stems would be useful.

There are good reasons why other major cloud vendors aren't listing their cloud infrastructure business the way Amazon did. But as more of their revenue is in the cloud -- as Amazon has defined it, a malleable resource with endless applications -- there's more reason for them to follow Amazon's lead in detailing the earnings.

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