Amazon to Keep Investing in Cloud Despite Margin Pressure

AMAZON-SMARTPHONE-FIRE Inc (NASDAQ:AMZN) plans to build data centers in every large country over time as part of a broader investment push that will eventually make the Internet retailer's cloud computing arm the largest part of its business.

In a roundtable with reporters on Wednesday, Amazon Web Services chief Andy Jassy did not provide a timetable for these investments in the AWS unit, which provides Internet-based computing and data management to corporate clients.

Jassy added that the Internet retailer intends to continue investing in AWS, despite investors' concerns it was spending too much and sacrificing margins.

"We are prepared to invest as much as it takes to grow the business," Jassy told reporters. He added that Amazon plans to build data centers in "virtually every large country" over time.

Amazon stunned investors after missing quarterly results expectations across the board last month, including for margins, revenue and net loss. Investors who had long overlooked its streak of quarterly losses are worried that growth is peaking for Amazon.

Building data centers around the world is an expensive endeavor. In U.S. government filings this year, Amazon said it would invest at least $1.1 billion over three years to build a data center in central Ohio in exchange for tax breaks.

Jassy told reporters that this cost estimate for building a data center was "wrong, by a lot" but declined to say how much Amazon spends on building each center.

Amazon Web Service pioneered the model of providing Internet-based computing power to corporations that did not or could not invest in it, and is viewed as one of the company's most prized assets. But its head start has narrowed, as Google Inc, Microsoft Corp and a host of other technology companies have invested heavily.

Jassy said on Wednesday that high barriers to entry would limit the pool of competitors over time.

"It turns out, scale matters a lot," he told reporters on the sidelines of Amazon's third annual AWS conference in Las Vegas.

(By Deepa Seetharaman; Editing by James Dalgleish, Jeffrey Benkoe and Matthew Lewis)