Why Stalled AWS Margins Should Worry Cloud Investors

Jeff Bezos. Photo by Bloomberg.
By
Steve Nellis

Amazon’s first quarter showed a solid profit on better-than-expected revenue. But there was a dim spot: Operating margins for the company’s fast-growing cloud computing segment, Amazon Web Services, fell slightly to 27.9% from the previous quarter. It’s beginning to look like that’s the industry norm for cloud computing.

If so, it’s a big problem for Microsoft, the No. 2 player in the sector, which is used to margins closer to 45%.