Analysts Weigh In
Amazon’s decision to name Jassy as its new CEO completes the company’s shift from a retailer to a tech company, according to David Bicknell, principal analyst at GlobalData, a London-based data and analytics company.
“AWS is pivotal to Amazon’s business,” Bicknell said. “It accounts for a massive 52 percent of Amazon’s quarterly operating profit, but only 12 percent of total sales. It will continue to be the engine of Amazon’s growth and its most important unit for years to come.”
Technology is at the heart of Amazon’s operations, and its success is driven by its strength in the key themes disrupting the tech, media, and telecom sectors, including cloud, artificial intelligence and the future of work, according to Bicknell.
While Jassy is a proven leader who has overseen AWS’ growth to a $51 billion annual revenue run rate business, JP Morgan has heard concerns about Jassy’s “limited retail experience and what that may mean for a potential AWS (spin-off),” according to analyst Douglas Anmuth.
“But we don’t think a lot is going to change, with Jassy likely to carry on Bezos’ same core values and beliefs given similar operating cultures between consumer and AWS,” Anmuth said in a JPMorgan report today. “And as part of AMZN’s S-Team for years, Jassy has still been close to the consumer business in which he originally started at Amazon. Importantly, we expect Bezos to remain involved in key strategic decisions, and we believe he had already stepped-back from much of the day-to-day decision making since Amazon adopted its consumer and AWS CEO structure in 2016.”
As for an AWS spin-off, JPMorgan does not believe there‘s any urgency given AWS’ strong profit contribution combined with the fact that most regulatory concerns do not stem from Amazon operating both businesses, Anmuth said.
In a June 2019 interview, Jassy said he saw no need to spin off AWS from Amazon -- unless federal antitrust regulators force it.
Jassy’s remarks at Recode’s Code Conference in Scottsdale, Ariz., followed a Washington Post report on a Federal Trade Commission and Department of Justice agreement that put antitrust oversight of Amazon under the auspices of the FTC, and a presidential campaign call from Sen. Elizabeth Warren (D-Mass.) to break up Amazon and other large technology companies.
“I can’t speak to what the government is thinking or will do, but at the end of the day, we operate in the United States, and we will follow the United States laws,” Jassy said at the time. “If we were forced to do it, I guess we would have to do it. We don’t spend a lot of time talking about it.”