Why Profits From Amazon's Cloud Business Could Be About to Soar

Amazon (NASDAQ: AMZN) reported impressive fourth-quarter results last week, showing strong revenue growth, better-than-expected margins, and strong current-quarter guidance from management. The company reported accelerating growth in revenue from third-party seller services, and announced that there is free two-hour Amazon Fresh and Whole Foods delivery available to Prime members in 2,000 cities and towns.

These are certainly exciting developments, but what could be even more important is a subtle change management made to how it accounts for its server assets in its Amazon Web Services (AWS) cloud business. This change suggests AWS could be much more profitable than investors previously thought.

In the company's fourth-quarter press release, management said first-quarter operating income is expected to be between $3 billion and $4.2 billion, compared to $4.4 billion in the year-ago quarter. That guidance includes "approximately $800 million lower depreciation expense due to an increase in the estimated useful life of our servers beginning on January 1, 2020."

Source Fool.com