RFHPC64: AWS Profitability – Ready for the Cloud Apocalypse?

In this episode, the Radio Free HPC team discuss the possibility of a future where the Big 3 (Amazon, Google, and Microsoft) figure out that Cloud is not profitable and pull the plug. If that Cloud Apocalypse sounds far fetched, check out these recent news nuggets:

  • An article in The Register that describes how Amazon lost money despite $20 Billion in revenue.
  • Business Week says that Amazon’s cloud unit, AWS, is one of the fastest-growing software businesses of all time, as Bloomberg Businessweek‘s Ashlee Vance recently wrote. It’s also in a hotly contested market. Google, Amazon, and Microsoft (MSFT) have been slashing prices to lure customers from one another.
  • The Wall Street Journal says that “The developments point to the possibility that profit margins in Amazon’s cloud unit—believed to be much higher than its online retailing business—face a long-term squeeze that add to investor concerns about the company’s profitability.”

If you’re more into numbers, the team has put together a spreadsheet of AWS revenue that does not paint a rosy picture.
In fact, Henry has got thatAmerican Pie song by Don McLean in his head. What would the new lyrics be? I’m thinking they’d go something like this:
The Day the Cloud Died
A long, long time ago
I can still remember how cloud profit used to make me smile
But I knew if I had my chance
That I could make shareholders dance
And maybe they’d be happy for a while
But second quarter made me shiver
With forward-looking statements I’d deliver
Bad news on the doorstep
Google price-dropped ten percent
I can’t remember if I cried
When analyst expectations lied
But something touched me deep inside
The day the cloud died
[Chorus]
So bye-bye, the Cloud had gone dry
Drove my margins to the brink and now my board’s asking why
And them good old boys spit out the Kool-Aid and cried
Singin’ “This’ll be the day that Cloud died
This’ll be the day that Cloud died.”
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