Cloud revenue rose 47% in 4Q16
Amazon’s (AMZN) cloud business, Amazon Web Services (or AWS), is under scrutiny as the company reports its 1Q17 results. AWS’s revenue rose 47% from 4Q15 to $3.5 billion in 4Q16. This rise would have excited investors had it not been for Wall Street’s revenue estimate of $3.6 billion for AWS in the quarter.
Will AWS’s revenue come out on top of expectations this time around, or will the business deteriorate under the weight of intense competition from rival services by Microsoft (MSFT), Alphabet’s (GOOGL) Google, Oracle (ORCL), and IBM (IBM)?
Beyond absolute revenue, growth rate in focus
Investors aren’t just looking to see whether AWS meets or exceeds analysts’ consensus sales estimates, they’re also keen on its growth progress.
Is growth accelerating or decelerating, and what does that say about Amazon’s cloud prospects? Although looking at AWS’s revenue growth trend above shows that its growth rate has slowed as it’s grown larger, no one expects this growth rate to fall drastically.
Is AWS safe?
Because Amazon has the largest share of the cloud infrastructure market, it also has the most to lose if the competition catches up. As such, in the company’s forthcoming earnings report, investors will likely be hoping for clues about what Amazon’s management is doing to ensure that it maintains or extends its cloud lead.
Shipping new cloud features, expanding into more regions, and making strategic alliances will likely be interpreted as efforts to strengthen AWS’s competitive advantage.
For example, Amazon has recently shown interest in going deeper into the enterprise software business, the domain of Microsoft and Oracle.