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Summary:

Amazon Web Services revenues may hit $30 billion within the decade, according to Morgan Stanley analyst Scott Devitt.

reInvent-Keynote-1

At least one Wall Street research firm was very happy with what transpired at AWS re:Invent this week. Amazon Web Services revenue could soar ten-fold between now and 2022 to more than $30 billion a year, according to projections by Morgan Stanley analyst Scott Devitt. In a research note, Devitt raised his stock price target from $380 per share to $404 per share.

JPMorgan expects AWS revenue grow revenue over ten fold between now and 2022.

Morgan Stanley expects AWS revenue grow revenue over ten fold between now and 2022.

From afterthought to big deal

Wow. We’ve come a long way from the days — not that long ago — when AWS was barely a consideration when it came to overall Amazon earnings. Earlier this week Amazon SVP Andy Jassy was asked how focused Amazon CEO Jeff Bezos (who did not speak this year) is with AWS said: “Jeff is very interested in the AWS business — it’s very possible that AWS could be the biggest business at Amazon.”

Jassy did not give a timeframe there, but if you track AWS sales numbers over its 7 year history — as much as they can be tracked given that they’re buried in a broader category — the trajectory has been up, up, up (see chart below.) Most pundits — including Gartner — put AWS in a class by itself in the cloud computing market with legacy IT players struggling to make headway

But back to Morgan Stanley. Devitt based his rosy predictions on what he sees as increased AWS traction in enterprise accounts. “After the first 2 days of the AWS re:Invent conference, we have increased conviction that AWS is still in the early innings of creating a meaningful public cloud ecosystem that will increasingly extend into large enterprises,” he wrote. He cited big data news in particular, noting that the Kinesis and Amazon RDS for Postgres releases will “allow enterprises to store, index and analyze data in many different forms with minimal friction and latency.”

Get a grip people

So everything’s coming up roses for AWS. But here’s where we should all take a breath and remember it’s very early in the cloud era and it’s by no means obvious (to me anyway) that all AWS forays into new arenas — desktop as a service (?) — are destined for greatness. And there are more competitors coming online all the time some of which focus their efforts finely to capture a defined piece of the market. Maybe one of these players will upset the AWS apple cart down the road.

After all, how many people thought even 5 years ago that an online book seller would create and then dominate this massive cloud IT market?

Amazon Web Services net sales.

Amazon Web Services net sales.

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  1. The thing about Amazon is that even if AWS becomes a $30 billion dollar business the shareholders will not get any benefit from it. Amazon is like a non-profit. All the value goes back to the customers or to the employees (i.e. the top executives).

    From a customer standpoint it is great, but why anyone would want to invest in them is beyond me. Once enough people realize the fact that AMZN will never return any cash to shareholders then the stock price will collapse.

    As Ben Graham said the reason why you buy shares in a company is because you expect to receive a share of the profits. That will *never* happen with AMZN.

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