Recently, Macquarie Capital produced financial analysis that expects Amazon Web Services (AWS) to produce $3.8 billion in revenue this year. The common view is that Amazon’s cloud and other web service products are already gangbuster. I reinforced that thinking in The Atlantic. But, it is possible to have a contrarian opinion. The cynics are in the minority but alternate analysis can help identify downside risks.
y-axis is in millions
The picture above shows the current growth of Amazon’s “other” in the quarterly reports (“10-Qs”) – dark blue line up to 2012. “Other” includes AWS and additional, non-related, products. No one knows exactly how much of “other” is AWS and teasing out the percentage is an art that can produce disparate results by different analyst. EC2, the cloud compute service, was launched in the third quarter of 2006. “Other” before then does not include the cloud business that most believe is responsible for the fast growth (AWS existed before 2006 but not in form seen today). If “other” grows 60% in 2013 (dark blue line above) and the non-cloud part grew at the rate of inflation since 2006 (light blue line) then the revenue will be $3.6 billion – close-ish to Macquarie Capital’s number. However, if the growth of “other” continued along the exponential track that it had prior to 2006 (black line above) then the cloud part is much less. It is about $1.5 billion.
Now, I do believe that the cloud revenue is more than $1.5 billion, but Amazon does not break out the business separately and speculation can be optimistic as well as pessimistic.
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