Ahead of Amazon revealing just how much revenue it makes from its Amazon Web Services division later this month, analysts at Citi are pushing the boat out and trying to figure out just how much the cloud storage and data processing unit is worth. The good news from their number crunching is that the revenue is flocking in, with the company likely to be doing some $6.6 billion in business this year. The bad news is that it could take a small loss of around $49 million, showing just how thin the margins are on cloud computing, especially when Amazon is investing hard in growing the business.
Looking ahead, Citi reckons that Amazon will be making over $9.1 billion in the next financial year, with the company starting to make a profit on that huge revenue stream, even if it is only an estimated $69 million (so less than 1%) in profit. However, it is the impressive growth that Amazon will be keen to focus on when the actual figures come in. Every Amazon user they sign up is someone not switching to a rival, and all those users are being offered plenty of new and improved services (see previous posts) to keep them in the fold, and their business on Amazon’s cloud.
Of course, analyst figures have been known to be wide of the mark, but if the actual results are anything like these, it demonstrates how Amazon’s early and aggressive action in growing AWS has created a highly impressive business. With such a large and distinct business-focused arm in a largely retail organisation, this might increase the pressure on Amazon to spin off AWS on its own, to focus on driving profits and continuing its evolution toward a world centred around the Internet of Things and the cloud. Hopefully, we’ll find out more during Amazon’s next quarterly results conference call at the end of April. Perhaps Jeff Bezos will take some time to lay out a road map for the AWS division to give customers and investors a better idea of how it will evolve, and where he expects this juggernaut cloud business to head next.
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