Amazon Web Services Is Worth $1 Trillion

By Douglas A. McIntyre Published May 3, 10:30AM EDT

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Amazon Web Services Is Worth $1 Trillion — © Andrei Stanescu / Getty Images

One of the things made clear by Amazon’s most recent quarterly statement is that its e-commerce business is in trouble. The North American e-commerce operation posted an increase in revenue of only 8% to $69.4 billion. It reported an operating loss of $1.6 billion. International e-commerce had revenue of $28.8 billion, a drop of 6%, and the unit had an operating loss of $1.3 billion.
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The bright spot in earnings was the results for Amazon Web Services (AWS), the largest cloud services operation in the world. Its revenue rose 37% to $18.4 billion. Operate profit reached $6.5 billion, up 57%.

Amazon’s e-commerce business may have seen its best days, at least in terms of rapid growth. It has hundreds of smaller competitors, probably led by Walmart. Its consumer electronics products are among the most advanced in the market. However, that does not appear to have helped it much last quarter.
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Amazon Prime, part of the e-commerce operations, faces growing competition from such companies as Apple and Disney. The recent earnings release from Netflix shows how brutally the video streaming business has become. Investors can fairly ask whether the Prime user base has grown at all recently, particularly because it raised the prices of the service recently.
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Amazon’s current market cap is $1.27 trillion. Less and less of that value comes from its besieged retail operations. More and more comes from its dominant cloud business. A recent study by Synergy Research Group showed Amazon had 33% of the global cloud infrastructure sector in the fourth quarter of last year. Microsoft ranked second at 21%. The industry’s growth rate last year was 37% and shows no sign of slowing. AWS could be a $100 billion revenue business in the near future.
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Cloud computing businesses carry a much higher multiple than e-commerce does. With its market share and growth, AWS is the engine of Amazon’s success, now and in the future. At Amazon’s market cap, it is reasonable to say AWS is three-quarters of the total.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.