Ten years ago when Amazon launched AWS, it was a simple side business, a little experiment in selling some of the excess capacity it had in its data center. Well, that little experiment has turned into a smashing success, and in yesterday's earnings report it did better than its parent (who was reportedly glowing with pride over the little tyke's performance).
How well did it do? Consider that while Amazon's core business reported an operating income of $588 million, AWS was even better with operating income of $604 million. The child surpassing her parents, just as it should be.
At least one analyst had predicted a much lower (but, let's face it, still quite healthy) growth rate of 45 percent. The analyst was way off, and The Wall Street Journal reported that sales gushed at an impressive 64 percent for the quarter.
Most of the news was good for AWS with TechCrunch reporting revenue of $2.57 billion for the quarter, well ahead of last year's report of $1.57 billion and and slightly up from analyst predictions of $2.53 billion. It was also well in line with Amazon CEO Jeff Bezoz's prediction in an investor letter earlier this year of a $10 billion run rate for the division.
While it was a great quarter, Amazon executives cautioned that the numbers could fluctuate over time. In other words, don't expect 64 percent growth every quarter or at least expect things to move up and down some until the market matures a bit more.
One thing we do know is that the sky's the limit for the cloud market in general given the small percentage of data center activity that has transferred there up until now. Industry analysts are predicting that over the next five to 10 years the market will surge, opening a massive opportunity not just for AWS but for its competitors as well, particularly Microsoft and Google.
In fact, the market potential is so big that there is plenty of room for multiple winners here, perhaps even one we aren't considering right now. When Andy Jassy, CEO of AWS, declared last year that AWS could be bigger one day than Amazon itself, a few people chuckled, but when you look at the size of this market, it's entirely possible that one day that could happen.
For now, we have a very nice quarter and some high expectations that in the years to come what started off as a little experiment could be a juggernaut. With a huge market share lead—at least for now—the numbers may indeed fluctuate over time, but the trend should most definitely continue up.Chris Potter on Flickr. Used under CC by 2.0 license.