Amazon's Cloud Is One of the Fastest-Growing Software Businesses in History
Five billion dollars. — That's how much Amazon.com (AMZN) will rake in from its cloud computing business this year, according to a new estimate from Pacific Crest Securities. If true, it's an incredible figure.
Context & Ripple Effects
Amazon’s cloud unit was still difficult to size publicly in 2010, when coverage focused on the question of how large Amazon’s cloud business had become. Pacific Crest Securities’ $5 billion estimate gives the business a scale that can no longer be treated as a side project.
The estimate also lands as Amazon broadens consumer subscriptions with Kindle Unlimited and promotes Prime through the Fire Phone, making cloud revenue a distinct software-and-infrastructure engine alongside its retail-facing businesses.
First-order effects
- A $5 billion annual cloud-revenue estimate makes Amazon’s infrastructure operation material to investors evaluating Amazon beyond retail sales and thin retail margins.
- Enterprise buyers and software developers gain further evidence that Amazon’s cloud platform has reached a scale suited to long-term workloads.
Second-order effects
- Cloud rivals face greater pressure to match Amazon’s pace of service investment and pricing as customers gain a larger, more credible alternative to running their own infrastructure.
- Amazon can use a growing cloud revenue stream to support broader infrastructure investment, strengthening the platform on which its own digital services also run.
Third-order effects
- If cloud revenue continues to compound at this pace, capital-intensive computing infrastructure is likely to become a more consequential software business than a back-office utility, concentrating advantage with operators able to fund global-scale platforms.
The trend: Amazon’s cloud operation is becoming a standalone compute-monetization engine, shifting the company’s strategic center of gravity from retail distribution toward rented infrastructure and software services.