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Winning Cloud Deals with Banks Will Grow Amazon’s Credibility

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Banks have now started to embrace cloud technology

In the previous part of this series, we discussed how Google (GOOG) managed to win an important cloud deal with Spotify.

In another development, according to a report from the Wall Street Journal citing people familiar with the matter, Amazon (AMZN) has managed to win deals with top US banks for the use of its cloud computing service. The report says that these banks are Citigroup (C), Goldman Sachs (GS), and JPMorgan Chase (JPM).

Traditionally, banks and financial institutions have shunned the use of cloud services because of the security issues associated with these services. These institutions have the extra responsibility of keeping customer data private and secure due to the financial implications involved.

However, these institutions have slowly started to embrace cloud services due to improving security and the immense cost savings that these services bring.

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Deal with banks will further strengthen AWS growth

Such deals with banks could benefit Amazon, as they will strengthen its image of being a secure cloud player. Amazon’s cloud services arm, Amazon Web Services (or AWS), is already showing strong growth. Amazon reported that its sales from AWS rose to $2.4 billion in 4Q15 compared to $1.4 billion in the same period last year, a growth rate of around 70%.

According to Amazon, AWS revenue was just short of a $10 billion run rate at the end of 4Q15. The chart above shows how the revenues from its AWS segment continue to grow at a rapid rate.

For diversified exposure to Amazon, you may want to invest in the PowerShares QQQ Trust, Series 1 ETF (QQQ), which invests about 5.8% of its holdings in Amazon.

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