Amazon Earns Half Billion on Cloud



Not Raking in the Dough

I read where UBS, the Swiss banking giant, found that Amazon Web Services (AWS) earns $500 million yearly from its cloud computing business.

While that number may sound impressive to some at first blush, it’s really only around 2% of’s annual revenues. And in the blog I read about this news, that would be less than AWS makes on “garden rakes.”

UBS got its numbers by breaking out a lump sum of Amazon’s quarterly earnings reports that it calls “other” revenue, separate from its retail revenues. “Other” includes Amazon EC2, Amazon S3 and other services like packing and shipping goods. On the bright side, UBS predicts that AWS cloud revenue might grow to $2.54 billion by 2014.

So what do these numbers mean to you? On the one hand, $500 million is a tiny fraction of worldwide IT spending — which comes to $365 billion a year right now — so it’s painfully obvious that public cloud computing is a lot smaller market than it’s been made out to be. However, on the other hand, we know that private clouds are preferred right now, as enterprises still have the heeby-geebies about security on public platforms.

So, my take on this is that just because AWS isn’t raking in (forgive the pun) billions of dollars yearly on the cloud right now, it doesn’t mean it won’t someday. After all, it’s built the infrastructure. And you know about that saying: “If you build it they will come.”

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  • For a company the size of Amazon, $500 million, may not sound like a lot but that number is almost pure profit. Because its is an on-line retailer Amazon has to maintain its computing infrastructure as a cost of doing business. Whatever excess computing capacity it can sell is gravy. I am guessing here, but what is the retail net profit on a garden rake? 3% maybe? For Amazon cloud computing services must be closer to a 97% profit margin. According to my back of the napkin estimate Amazon would have to sell 3000% more rakes to return the same amount to the bottom line.

  • Chris Mallick

    I think the 500M needs to be looked in the context of revenue achieved by other hosting providers… I’d say in a very short time AWS is in the top 5 at most top 10 hosting providers…