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Amazon.com Inc. AWS Cloud Revenue

Amazon.com Inc. (NASDAQ:AMZN)

Date Published: 2016-08-04

Preface
Amazon.com Inc. AWS cloud revenue has surged to a new all-time high. But that's not the entire story.

STORY
The famed Amazon Web Services, or AWS, cloud business has been one of the pillars behind the Amazon.com Inc stock rise to now the fourth largest company in the world by market cap. Here is a snapshot of the cloud business revenue, by quarter:

Amazon's AWS cloud business has grown to nearly $3 billion in the last quarter and $9.9 billion in the last year. For context, Amazon.com Inc. total revenue over the last year topped $120 billion, meaning the cloud business represents about 1/12, or 8% of total revenue. Here's a chart of total revenue, with the orange highlighted area representing the cloud.

While AWS cloud revenue is tiny compared to the total, the cloud business does represent about 50% of total operating income. In fact, AWS has been the single biggest driver in the net income trend for Amazon.com Inc.

TROUBLE OR GROWTH
It's a fair thought to ponder -- whether Amazon.com Inc. is truly worthy of its $370 billion market cap, due in large part to the AWS business. We do note that while growth has been quite impressive, it is slowing and it is still really small for the overall Amazon.com Inc. business. Here is the cloud revenue growth rate, year-over-year by quarter:

The broader cloud platform segment is seen growing at staggering rates, topping $80 billion by 2020. Amazon.com Inc. is clearly the leader. Those are the facts. Now we decide if Amazon.com Inc. (NASDAQ:AMZN) stock can lean on that high margin, small revenue business. The author has no position in Amazon.com Inc. stock.

WHY THIS MATTERS
The secret to the cloud is not just its growth, but the need for the computing power to continually get faster and smarter. While pundits will point to Intel as the leader in the chip market for cloud servers, in fact, there is another company that has the undisputed lead in artificial super intelligence and computing speed. It will power the cloud, no matter which vendor ends up winning.

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