Amazon's cloud division is showing no signs of slowing down, but can it maintain its lead forever?
AWS, Amazon's highly profitable public cloud division, again delivered strong results in the company's latest earnings, posting $7.43 billion in revenue for the quarter, a 45% year-over-year increase, and expanding margins of 180 basis points.
Tech analyst Patrick Moorhead, founder of Moor Insights & Strategy, pointed out that accounting for hardware, software and services, the enterprise cloud market amounts to $3 trillion -- and the sheer size of the market means there's still room for multiple players to grow.
"There is a tremendous amount of growth and opportunity for anybody who's doing a cloud service," he explained.
Amazon has the lion's share of the public cloud market: As of August 2018, Gartner estimated that AWS's market share was 51.8%, followed by Microsoft (MSFT) - Get Report Azure (13.3%), Alibaba (BABA) - Get Report (4.6%) and Alphabet's (GOOGL) - Get Report Google Cloud (3.3%).
"Right now, AWS is larger in revenue and profit than the top five combined. But the smaller players, particularly Azure, is growing at a higher rate," said analyst Patrick Moorhead. "They are threats, but it's such a growing market that it would still take awhile for those folks to catch up to the size of AWS."
In its recent comments to investors, Amazon (AMZN) - Get Report executives didn't go into much depth about AWS or specific features driving growth in the division. But at Amazon's re:Invent conference in November 2018, AWS CEO Andy Jassy rolled out a plentiful range of features that he described in a keynote as a direct result of customer requests.
"Certainly, the feature set lead claimed by AWS became even larger this week, as new offerings -- enabled by a large R&D budget that AWS' tremendous revenue base and profitability help justify -- have been announced at a dizzying pace," TheStreet's tech columnist Eric Jhonsa wrote at the time.
Moorhead added that one of the features looked upon especially favorably by AWS's customers is the relative ease of down-shifting, or moving into less costly performance brackets based on the way an enterprise is actually using AWS.
AWS's leading position in cloud services is formidable, but that doesn't mean there aren't ways that competitors could close the gap, he added.
"This is where some interesting M&A work could go on -- someone could acquire a Salesforce (CRM) - Get Report or a Workday (WDAY) - Get Report , particularly Google," Moorhead added. "Google is really having challenges getting as many customers as you'd think -- and the primary reason they don't is because their whole company primarily thinks about consumer applications, whereas AWS and Azure are primarily thinking about a business customer."