Amazon.com, Inc. (NASDAQ:AMZN) Dominates Cloud Space

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Salesforce.com, Inc. (NYSE:CRM) using cloud service offered by Amazon web Services (AWS) continues to show Amazon.com, Inc. (NASDAQ:AMZN)’s dominance of the business. It has always been argued that the cloud business is one of the most competitive. However, it appears the e-commerce is operating unrivaled, having been on a rampage in growing its market share in the recent past.

Amazon Vast Cloud Infrastructure

The Internet of Things is growing rapidly as more businesses deploy millions of devices able to collect and exchange data. Amazon.com, Inc. (NASDAQ:AMZN) stands to be the biggest beneficiary of the robust growth given that it already has data centers distributed in 12 regions; unmatched by any other company and still growing.

Not even Alphabet Inc (NASDAQ:GOOGL) can claim to have the same cloud infrastructure that Amazon brings to the table. Latest research findings show that the AWS controls 31% of the cloud market share helped by its vast cloud infrastructure that continues to attract both small and big clients. Given that future battles will be fought, online companies with strong position in the cloud stand to increase their revenues base.

Growing AWS Revenues

If recent quarterly earnings are anything to go by, then the cloud business is slowly becoming a core business for the tech giant. The cloud business had an operating margin of 23.5% compared to 1.8% of the retail business. AWS revenues rising 64% to $2.57 billion meant it was the biggest earner among other companies betting big on the spectacle.

AWS accounted for 9% of revenue in the first quarter up from 7% a year earlier. As Amazon.com, Inc. (NASDAQ:AMZN) continues to ink big deals such as that one with Salesforce, the unit can only account for a bigger piece of revenue going forward.

Amazon has already acknowledged that its future lies in the cloud, which means it, will continue to invest big to affirm its edge.

AWS Solid Margins

Even though e-commerce giant is not the only company in the public cloud space, it is on course to generate $10 billion in annual sales this year. The only concern now is whether AWS margins will continue to grow at the same pace as revenues.

Given the higher margins that the cloud business comes with, the same should go a long way in bolstering the company’s overall earnings. Wall Street expects an uninterrupted string of quarterly profits this year from the e-commerce giant driven by AWS.

Bumpy Road Ahead

Other tech giants will not take the back seat and watch as Amazon affirms its dominance in the cloud business. The likes of Google, Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM) have already acknowledged the growth opportunities available in the cloud market and are expected to ramp up their investments going forward.

Profit margins for AWS are thus expected to come under pressure going forward as Amazon.com, Inc. (NASDAQ:AMZN) continues to invest in infrastructure and other technologies. An investment on this front is important for the company is to maintain its edge in the industry.

Bottom Line

Amazon has already proved its ability to spot new trends are create unique opportunities from them. Years of investments on the cloud front at the expense of profits are finally paying off, seen by the amount of market share the company controls. The company’s prospects can only continue to improve as more companies shift their operations to the cloud.

So far, the tech giant has performed extremely well amidst growing competition from other tech giants. Given the rate at which AWS is growing, it has become difficult to quantify how big Amazon.com, Inc. (NASDAQ:AMZN) can become even as it continues to bet big on e-commerce.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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