Amazon's cloud computing services, branded under the Amazon Web Services (AWS) moniker, could be a $1 billion business for the online retailer turned cloud provider by as early as next year, several analysts contend.
The speculation that Amazon's cloud is breaking the $1 billion barrier in the very near future comes as the cloud giant prepares to announce its 2011 second quarter earnings Tuesday.
"While still very small for Amazon (likely about $750 million revenue run rate), given the size of the market opportunity and Amazon's strong competitive positioning, we believe that this could soon be a $1 billion revenue segment," Citigroup Internet analyst Mark Mahaney said in a note to investors last week.
And Mahaney isn't alone in his lofty Amazon cloud expectations. In fact, his estimate could be seen as conservative. JPMorgan Chase's Dough Anmuth told Reuters that he expects Amazon's AWS to generate a whopping $2.6 in revenue come 2015.
Amazon become a cloud trailblazer when it launched AWS in 2006. Since then, Amazon's cloud services -- anchored by the Elastic Compute Cloud (EC2) and Simple Storage Service (S3), along with a host of others -- have seen steady growth.
Amazon has kept its true AWS value and revenues under tightly under wraps, creating an air of secrecy around its cloud successes. The company doesn't divulge the number of customers using its cloud computing services and in its quarterly earnings reports Amazon lumps cloud computing in a category dubbed "other," which also includes the revenue made through marketing and promotional arrangements and additional revenue drivers.
In Amazon's first quarter financial results from 2011, the company reported revenue of $9.86 billion for the quarter. Of that $9.86 billion, $311 million, or 3 percent of Amazon's overall revenue, was "other" revenue not generated by media or electronics or other general merchandise. It was unclear what portion of that $311 million was cloud-specific.
In a report last year, UBS analysts Brian Pitz and Brian Fitzgerald predict that Amazon Web Services revenue will hit $500 million in 2010. In 2011, AWS revenue will hit about $750 million, the analysts predicted. And come 2014, AWS could capture roughly $2.5 billion in revenue. Those predictions jibe with recent analyst predictions that put AWS near $1 billion by next year.
To showcase some of its cloud success, Amazon last week broke its typical silence and released details of the number of objects stored in its S3 storage cloud. According to Amazon, the number of objects stored on its S3 cloud storage service hit 449 billion in the second quarter of 2011, a massive jump from the 262 billion objects stored on Amazon S3 in 2010's fourth quarter.
Amazon also noted that S3 processed 290,000 requests per second at peak times, a jump from the 200,000 at the end of 2010.
Amazon said the 449 billion stored objects is enough for every resident of the U.S. to have 1,440 objects stored in Amazon S3, or for each person on Earth to have 64 objects stored on Amazon's storage cloud. That 449 billion objects stored on S3 equals four objects for every neuron in a human brain, and there are about as many Amazon S3 objects as there are stars in the Milky Way, Amazon contended.