Amazon reported its first-quarter earnings this week, and the revenue generated from its cloud computing division is driving much buzz around the potential for cloud profits. Amazon Web Services (AWS) — the company’s cloud service — generated revenue of $1.57 billion during the first three months of the year. And Amazon said that its operating income from AWS was $265 million. Those figures soar past the anticipated revenue figures that analysts had predicted for Amazon’s first quarter, sending heads turning and prompting questions like how profitable is the cloud really? Why has Amazon seen such massive success, and most notably, where are the other companies?
Of course, there are multiple factors that go into Amazon’s billion-dollar cloud-based revenue, but businesses in the U.S. have taken their sweet time getting aboard the cloud train. And now they are witnessing the potential profit that lies in developing cloud services. AWS is a gargantuan, international operation, but Amazon’s prowess in the e-retail scene has kept its cloud dominance out of mainstream focus. (AWS helps to power tech giants’ services like Netflix.)
The New York Times reports that Microsoft’s revenue from its cloud business Azure is estimated by Deutsche Bank to be about one-tenth of AWS. AWS has become almost the default cloud platform for new, smaller businesses, despite other tech giants offering their own cloud hosting services.
This surprising revenue report from Amazon could act as somewhat of a marker for the cloud computing industry; whereas people and businesses had been unsure of cloud’s potential success before, they are now seeing it reach its huge potential. In fact, though many had been skeptical of cloud platforms before, viewing them as money-suckers, Amazon’s has proven to be the opposite. Reuters quotes Wedbush Securities analyst Michael Pachter on the subject: “Amazon’s Web service is profitable, and apparently was a year ago as well. Everybody thought it was losing money … and is probably a bit smaller than people thought it was” — a notion clearly debunked by the earnings reported from AWS.
It’s important to keep in mind Amazon’s ubiquity in general when looking at its giant cloud revenue, but even a company as iconic and universal as Microsoft trails behind when it comes to cloud-based accomplishments. Other players include Salesforce, IBM, and a host of other big-name tech companies who are a part of just the beginning of cloud’s delivered profits. Research firm Gartner estimates that the cloud infrastructure market will double by 2018 and puts the current value of the cloud market at around $17 billion. Perhaps Amazon’s reported success thus far will propel more investment in ventures into the cloud.