One of the frustrations for those who cover the cloud infrastructure space closely is the dearth of information about just how big the cloud business is. This is largely caused by the fact that the biggest vendor of all, by an order of magnitude, Amazon Web Services (AWS) doesn’t share its revenue. AWS revenue is lumped in with a number of other peripheral Amazon business units in the "other" category. While commentators have tried to take a stab at how big the business is, there’s no real clarity.
A recent, and unfortunately timed, report from financial analysis firm Pacific Crest Securities suggests this is likely to change. In the report, published just before Amazon's quarterly earnings report, Pacific Crest predicts that AWS revenue would hit “nearly $5 billion” this year, up from an estimated $3.1 billion last year. Company rules state that operating segment revenue must be broken out when it (or profits or assets) exceed 10 percent of total company figures. Pacific Crest suggests that AWS will continue to double revenue every two years and hence reaching that 10% of figure of Amazon’s total revenue (which was $74.4 billion in 2013) looks likely to occur sooner rather than later.
Unfortunately for the credibility of the report, the AWS earnings call informed the world that Amazon's "other" revenue (which is largely made up of AWS' earnings) had, for the first time, fallen from $1.204B in the previous quarter to $1.168B this quarter. Interestingly, as The Register's Jack Clark points out, this is the first time (other than a blip back in 2013) that Amazon's other revenue has fallen (see chart below).
The difficult in assessing this chart is the lack of transparency over AWS-only revenue. Despite this category of revenue falling, AWS CFO Tom Szkutak spoke of AWS' growth saying:
AWS continues to grow very strongly. In Q2 we had usage growth of close to 90 percent year over year for the quarter
A large growth in the expenses side of AWS business, with the hiring of significant staff and massive infrastructure spend, impacts upon the short term profitability of the business unit. Amazon actually issued a press release alongside the earnings call and pointed out that:
The AWS team grew by thousands of employees this past year, expanding AWS infrastructure, enterprise and public sector sales capabilities and allowing the team to innovate at an accelerating pace
The commentary around Amazon's results have been maddening with some commentators declaring a massive fall in AWS revenue while others present a more moderate picture. The news will also reignite discussion about the potential of Amazon spinning out AWS as an independent entity – as it becomes an ever greater part of Amazon's business, CEO Jeff Bezos has two options, continue running it in-house and focus on two massive and not particularly comparable businesses, or spin it out and let it flourish on its own.
It’s also interesting that AWS’s growth (and it needs to be reiterated that these are just estimates) has grown faster after reaching the $1 billion milestone than did that of Microsoft, Oracle or
What is amazing is that VMware, the king of virtualization and a company that is decidedly enterprise in focus, posted revenues of some $5.2 billion last year. When you consider that AWS hasn’t really locked and loaded its enterprise strategy yet (or, at least, it’s got a huge amount of enterprise growth left to gain) it’s a pretty incredible fact that AWS is closing in on
We’re all looking forward to the day we see some accurate numbers from AWS. In the meantime we look, estimate and salivate at the incredible business that AWS is building.
