Amazon reported a sharp jump in Q2 earnings Thursday, thanks partly again to its AWS cloud computing services. But the spotlight, not surprisingly, instead was shined on Amazon’s Alexa voice assistant– In fact, Alexa came up some 31 times in the release.
“We want customers to be able to use Alexa wherever they are,” CEO Jeff Bezos said. “There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year. Our partners are creating a wide variety of new Alexa-enabled devices and experiences.”
So imagine the potential for Amazon when you pair Alexa with AWS, long a big bread winner for Amazon.
As Alexa-powered Echo devices are increasingly used on the mass consumer level through more than 13,000 Alexa-enabled smart home devices or in vehicles from Ford to Toyota cars, Amazon is also set to change and capitalize on the way corporate work is going to be done — through Alexa for Business under AWS, an initiative the Seattle company first announced in November. What does that mean? Companies like pharmaceutical giant Johnson & Johnson, already an AWS customer, have been working with Amazon, and even hosted an internal hackathon recently, to explore ways they can use Alexa for different things including finding available conference rooms and setting up meetings.
“Voice is a new frontier for us,” Keith Blizard, vp of end user & public cloud services at J&J, which owns brands from Tylenol to Neutrogena, said at the Voice Summit in Newark, NJ on Tuesday. “How do you reduce 10 minutes you waste at start of meeting and make it more productive?”
He added Alexa could also be used by scientists or doctors who use their hands all the time. Johnson & Johnson also is looking at using Alexa to reduce help desk tickets, he said.
Amazon, for its part, already uses Alexa at over 700 of its conference rooms and 70% of its meetings are started by Alexa, said Collin Davis, general manager of Alexa for Business at Amazon.
Why is this crucial? Consumers’ growing adoption of smart speakers and the central role Alexa plays to help Amazon hook and attract customers is just one aspect of it. AWS, while less sexy and not having the attention-grabbing headlines like a Prime Day, is a big profit driver that helps finance Amazon’s various pet projects and initiatives like faster-ever delivery to consumers. Just consider this: Amazon’s Q2 shipping cost alone surged 31% to $6 billion, more than double the $2.5 billion Amazon posted in net income.
Q2 revenue at AWS, representing 11% of Amazon’s total Q2 sales, surged 49% to $6.1 billion, outpacing growth in other divisions, including the largest North America unit. AWS’s operating income at $1.6 billion represented more than half of the company’s total for the quarter.
In another big contrast, operating margin, a measure of profit that looks at the percentage of sales left after minus operating costs sold, widened by 5 points to nearly 27% at AWS from a year earlier. North America segment, three-fifths of Amazon’s sales, posted a much smaller 5.7% rate while operating margin for the still money-losing international division was negative.
That alone explains why Alexa for Business could become a big game changer to stoke even more growth in AWS, Amazon’s real cash cow.