Comments on: Amazon’s cloud is bigger, more profitable than we think, report says

By: Olof Lindgren

Olof Lindgren — Tue, 08 Jan 2013 11:55:57 +0000

I wonder why Macqarie believes AWS’ gross profit equals its revenue…

By: gorto

gorto — Mon, 07 Jan 2013 23:18:33 +0000

My understanding that (unlike Amazon’s main retail business) AWS was never a “low-margin” operation with returns on or around 30% to be gradually reduce as and when competition takes place.
Why would AWS operate at “book” margins when they’re the biggest and best initial offering in town? Harvest what you can and incrementally reduce prices as competition becomes available to both remain competitive and raise the cost of entry to newer Cloud providers.

By: Robert Cathey

Robert Cathey — Mon, 07 Jan 2013 21:08:28 +0000

Spinoff.

By: Martin Bergstrom

Martin Bergstrom — Mon, 07 Jan 2013 16:24:37 +0000

I don’t have access to the necessary data to confirm this study, but it makes great logical sense. Cloud computing is still in its relative infancy but is really starting to take off with small to medium sized start-up firms and, as the study states, should do well in emerging markets where it will be easier to outsource heavy IT capabilities than construct new data centers. This is especially true in Northern Latin America and Africa, both of which are experiencing high levels of growth and have climates poorly suited to native data centers (high temperatures or humidity and erratic local utilities). Moreover, despite this potential, the data centers necessary for consistent cloud computing capabilities are highly advanced and expensive, it is difficult for newcomers to enter the market quickly, giving companies that already have these capabilities or that can easily adapt existing infrastructure to contain cloud structures temporary monopolies that should ensure decent profit margins in the near future. Considering all these factors, Amazon is very well placed to extract value from its Cloud Computing Services. Even if revenues are not as high as this study estimates, I would put my chips in Amazons corner for the easily foreseeable future of cloud computing