Don’t look now, but AWS might be a billion-dollar biz

AWS rev

Analysts and shareholders spent yesterday being up in arms over Amazon’s missed earning targets — a shortsighted mindset that we’ve addressed before — but the cloud computing watchers might have noticed something very noteworthy in Amazon’s quarterly statement. “Other,” the revenue category in Amazon’s reports that encompasses Amazon Web Services, is growing like mad — 70 percent over last year, in fact. This matters because it likely means AWS is outpacing its projected growth and is rapidly approaching a $1 billion run rate.

Last August, UBS analysts Brian Pitz and Brian Fitzgerald put out possibly the most-thorough projections for AWS’s growth, something Amazon doesn’t do. Pitz and Fitzgerald projected AWS would account for $751 million of a total $1.2 billion for “Other” in 2011. However, this quarter’s 70 percent year-over-year increase resulted in third-quarter revenue of $407 million, bringing total “Other” revenue to $1.07 billion for the year thus far. If it grows by another 70 percent in the fourth quarter, “Other” will do $546 million for the quarter and almost $1.6 billion for 2011. If UBS’s percentages of AWS revenue to total “Other” revenue are correct, AWS might hit the billion-dollar mark this year.

Last year, by comparison, “Other” grew 48 percent year over year in the third quarter, and 39 percent in the fourth quarter. Even if it doesn’t grow at all year over year in the fourth quarter, though, it will hit more than $1.3 billion for the year. In-Stat recently predictedthat Infrastructure as a Service will be a $4 billion market by 2015, but that might end up being too small a number if AWS continues its rapid revenue climb. The UBS projections, which now look low, have AWS doing close to $2.54 billion in 2014.

Whatever the actual market size though, one has to assume AWS will be responsible for the lion’s share. Rackspace topped $100 million in cloud revenue in 2010, and has done just just over $80 million over the first two quarters of 2011. When Terremark announced its fiscal third quarter earnings in February before the Verizon acquisition closed, it claimed an annual cloud computing run rate of $37.5 million.

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