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Amazon’s Cloud Revenue is Important Information for Potential Customers

by Chris Gaun  |  January 30, 2013  |  Comments Off on Amazon’s Cloud Revenue is Important Information for Potential Customers

Amazon released another quarterly report yesterday and there was still no indication that the cloud AWS segment will be broken out from its grouping with non-cloud products. Today, AWS revenue is recognized in the “other” revenue category with non-cloud products while most of Amazon’s business is in the “Media” and “Electronics and other general merchandise” categories. Predicting the broader “other” revenue is possible and I have done so in The Atlantic, but the exact percent contributed to Amazon’s cloud business is much trickier – as mentioned in a previous blog. The size of Amazon’s cloud business is important information for customers, as it can help influence their own decision to invest in AWS.


One possible indicator for the relative growth of Amazon’s cloud business is the overall amount of money that is being spent on products, in the form of capital expenses. Indeed, as the chart above shows, Amazon’s capital expenditures have increased substantially over past few years. However, as part of these investments, Amazon added 20 new consumer fulfillment centers in 2012 – for a total of 89 – and that information is impossible to separate from possible cloud related investments – e.g. data center equipment, software cost etc.

Other indicators of Amazon AWS growth this quarter were four out of the twelve highlights of the report (source):

• Amazon Web Services (AWS) announced the launch of its newest Asia Pacific Region in Sydney, Australia, now available for multiple services including Amazon Elastic Compute Cloud (EC2), Amazon Simple Storage Service (S3), and Amazon Relational Database Service (RDS). Sydney joins Singapore and Tokyo as the third Region in Asia Pacific and the ninth Region worldwide.
• AWS announced that SAP Business Suite is now certified to run on the AWS cloud platform. Enterprises running SAP Business Suite can now leverage the on-demand, pay as you go AWS platform to support thousands of concurrent users in production without making costly capital expenditures for their underlying infrastructure. AWS also announced that SAP HANA, SAP’s in-memory database and platform, is certified to run on AWS and is available for purchase via AWS Marketplace.
• AWS continued its rapid pace of innovation by launching 159 new services and features in 2012. This is nearly double the services and features launched in 2011.
• AWS has lowered prices 24 times since it launched in 2006, including 10 price reductions in 2012.

So AWS is clearly growing – the question now is, “by how much?” To that point, groups purchasing the service have little information. The company’s financials are not immaterial for mission critical application deployments and other reasons. For example, if the service currently has a large burn rate, then that might indicate that the current prices are loss leaders and will eventually rise. Or, it may mean the service is perfectly solvent and profitable in long-term, but is growing – spend money to make money. Or, it might have many other explanations. It is impossible to know without more information.

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Note: This is an individual analyst’s blog and not a piece of Gartner research.

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Chris Gaun
Research Analyst
4 years at Gartner
7 years IT industry

Chris Gaun is an Analyst with Ideas Research. ...Read Full Bio

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