The cloud computing industry has evolved so much in the last two years with competition for the top spot intensifying every quarter. With Amazon (AMZN, Financial), Microsoft (MSFT, Financial), IBM (IBM, Financial), Google and Oracle (ORCL, Financial) in the race, things are pretty tight for all the players, and there is very little room for error. Despite the increasingly difficult task of adding more clients, Amazon Web Services continues its great run at the top of the Infrastructure as a Service (IaaS) segment.
During the first quarter, Amazon Web Services notched $3.661 billion in revenues, growth of 42.67% compared to the prior period. Though the quarterly revenue growth graph looks as if Amazon is losing momentum, Amazon Web Services has been as steady as it can be.
During the second quarter of 2014, Amazon Web Services had $1.050 billion in revenues and took five quarters to hit $2.085 billion in revenues. The move from $2 billion to $3 billion took only four quarters, and the $3 billion to $4 billion sprint looks set to be crossed in four quarters again. This is as clear an indication as possible that competition has done little to affect Amazon’s steadily expanding revenue streams.
Since things are steady, as Amazon’s size gets bigger and bigger, its growth rate graph looks like a nice downward slope. Fourth-quarter data from Synergy Group validates this theory as Amazon Web Services' market share remained the same during 2016 and 2015 while Microsoft and Google improved their market shares at the expense of smaller players.
The market is getting bigger by the day, but Amazon seems to have firmly entrenched itself at the top with more than 40% of the market under its control.
With the Infrastructure as a Service market expected to keep growing at solid double-digit rates, all the big players will be in a position to keep expanding their revenues from cloud computing. But, as of now, no one is yet in a position to challenge Amazon’s dominance in the infrastructure segment.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
Start a free seven-day trial of Premium Membership to GuruFocus.
