By now, most technology industry analysts have released their predictions for 2012. Many, including IDEAS, forecast that Amazon AWS would become the first cloud venture to have over $1 billion in revenue. We were all probably wrong.
That's because Amazon AWS likely already reached that mark in 2011. The financial results for its cloud business are reported by Amazon in a category called "other," which Amazon defines as "AWS, miscellaneous marketing and promotional agreements, other seller sites, and co-branded credit card agreements." Revenue from "other" for the past decade is shown in the chart below, which is sourced from Amazon's own quarterly report. However, by separating the sales specific to Amazon's cloud business from "other," we can get a pretty good idea of Amazon's revenue from cloud.
Figure 1. Amazon Sales for "Other" Category. Source: Amazon Quarterly Reports
Some good clues come from a well-publicized report issued in 2010 by Deutsche Bank about the future trends of Amazon's cloud business. The report included estimates of Amazon's actual AWS revenue* (see Table 1).
Table 1. Deutsche Bank Estimate of Amazon AWS Revenue 2006-2009
| Year | Amazon Worldwide Net Sales for “Other” Category | Amazon Cloud Revenue Estimates from Deutsche Bank | Percent |
|---|---|---|---|
| 2002 | $ 87,404 | ||
| 2003 | $ 111,626 | ||
| 2004 | $ 132,531 | ||
| 2005 | $ 230,000 | ||
| 2006 | $ 283,000 | $ 99,000 (Actual) | 35% |
| 2007 | $ 383,000 | $ 148,500 (Actual) | 39% |
| 2008 | $ 542,000 | $ 222,750 (Actual) | 41% |
| 2009 | $ 653,000 | $ 334,125 (Actual) | 51% |
| 2010 | $ 953,000 | ||
| 2011 | $ 1,586,000 | $ 1,000,000 (Trend) | 63% (Trend) |
Table 1 – Deutsche Bank AWS Revenue Estimates as Percent of Amazon's Other Net Sales.
Figure 2. Estimated Percentage of Amazon "Other" Revenue from AWS
Figure 2 - Blue Bars Represent Deutsche Bank's Amazon AWS Cloud Revenue Estimate Divided by "Other" Net Sales from Amazon's Quarterly Report. (Extrapolating from Deutsche Bank's Numbers Gives a Linear Trend, Shown by the Line, that Explains 90% of the Variance.)
Based on the Deutsche Bank estimates, the percentage of Amazon's "other" revenue deriving from AWS has been steadily increasing, rising from 35% in 2006 to 51% in 2009 (see Figure 2). Projecting this trend forward, the percentage of AWS revenue reached 63% in 2011, as shown by the orange bar in Figure 2. According to Amazon's recent earnings report, "other" revenue increased 66% to $1.586 billion in 2011, which suggests that AWS revenue nearly reached $1 billion. This conclusion does not seem far-fetched, given the past increases documented by the Deutsche Bank report, and the fact that no other parts of Amazon's "other" revenue were likely to have been gangbuster businesses that would cause a 66% jump in sales last year. It is not hard to imagine, then, that we were all wrong, and Amazon's cloud business has already passed the benchmark we were looking forward to in 2012.
*Sales and revenue are not the same thing, but the former is a subcomponent of the latter. For most situations, revenue will be greater than sales. Here they are probably pretty close, but the actual percentage may be slightly different.
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