Amazon Cloud: The Results Are In

In 2014, AWS generated $4.6B, growing 49%. In 2013, AWS generated $3.1B, growing 69%. AWS as a business is now 7% of Amazon’s overall net sales. If AWS’s run rate continues as it is now, we estimate it will generate $7.2B net sales in 2015, a growth of 57%.

AWS is a profitable business. In 2014, operating income was $660M yielding a 14% profit margin and a 36% share in Amazon’s total operating income of $1.8B. For comparison purposes, Rackspace posted nearly $1.8 billion in revenue and a $163 million net profit, giving it an operating profit of about 9%.

Looking at quarterly growth since Q1 2013 it turns out that AWS revenue is vulnerable for price cuts. Q1 2014 growth slowed to 9% and Q2 2014 declined 4% against Q1 as the result of a series of price cuts, ranging from 28 percent to 51 percent. The price cuts impacted profitability as well; margins dropped from 23% to 8% in Q2 and Q3 2014. Profit margins for Q4 2014 and Q1 2015 increased again to 17%.

The price cuts also had an effect on AWS twelve month trailing (TTM) revenues as TTM growth dropped from 14% in Q1 2014 to 9% in Q2 2014. TTM growth is now at 11% and currently AWS annual revenue is $5.2B.

Check out the graph below for the key data sourced from Amazon’s Q1 2015 Quarterly Results.


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About Pim Bilderbeek