Amazon's cloud computing service, Amazon Web Services (AWS), is growing fast — very fast.
AWS essentially rents computing power to a variety of startups, government agencies and other corporations. Year over year, AWS continues to see a 55 percent growth rate. Some say, soon, AWS may subsidize Amazon's retail operations — if it isn't already.
Amazon's recent earnings have apparently disappointed some investors. But AWS reportedly took in $3.2 billion in revenue in the third quarter of 2016. While only about 11 percent of Amazon retail's $29 billion in earnings, AWS' margins are much higher — $1 billion compared to Amazon retail's $360 million. AWS is expected to reach a total of $10 billion in sales by the end of this year.
Some are even starting to compare the use of AWS to a tax, as it is so widely used by so many companies. Social Capital's VC investor, Chamath Palihapitiya was quoted as saying, “AWS is a tax on the comput[ing] economy ... more companies than not will be using AWS versus building their own infrastructure. If you believe that, over time, the software industry is a multi-, deca-trillion industry, then ask yourself how valuable a company would be who taxes the majority of that industry.”
AWS currently accounts for over 45 percent of the revenue generated by public "Infrastructure-as-a-Service" providers — more than competitors Microsoft, Google and IBM combined.
Most recently, small business cloud accounting firm Xero attributed a net $19 million loss in Q3 on migrating to AWS, and the U.S. National Geospatial-Intelligence Agency (NGA) continues to move toward AWS cloud services for its encrypted classified and unclassified networks.