
Amazon Finally Discloses Cloud Services Sales, Showing 49% Jump - T-A
http://www.bloomberg.com/news/articles/2015-04-23/amazon-finally-discloses-cloud-services-sales-showing-49-jump
======
ChuckMcM
5 billion dollars a year. That is pretty impressive.

Compared that to a company like Google that can't make any money at all off
their infrastructure except with search ads[1] :-) That is the real story for
me. And a tiny bit personal because when I was there I didn't feel that
platforms got nearly the respect they deserved for keeping the roads rolling.

Congratulations to the Amazon team, that is an impressive feat indeed.

[1]
[http://investor.google.com/earnings/2015/Q1_google_earnings....](http://investor.google.com/earnings/2015/Q1_google_earnings.html)

~~~
aleem
It's even more impressive when you consider his statement:

> “Amazon Web Services is a $5 billion business and still growing fast -- in
> fact it’s accelerating,”

I take that to mean that the business is growing but the rate of growth is
also growing (hence "accelerating"; I like how he puts it so succinctly).

~~~
turingbook
The rate is not growing: 2015Q1 49%, 2014Q1 69%.

~~~
adwhit
> “Amazon Web Services is a $5 billion business and still growing fast -- in
> fact it’s accelerating,

Revenue 2013: $1000 Revenue 2014: $1690 (+ $690) Revenue 2015: $2518 (+ $828)

With those figures you could still argue that growth (in terms of extra
revenue per year) is accelerating.

~~~
dangerboysteve
Still even more impressive is AWS keeps dropping prices year after year and
has impressive revenue growth.

------
Lightbody
Consider that their revenue is about the same as what Salesforce (CRM) will
likely report (based on analyst estimates). This is pretty impressive:

    
    
      - Q1 2015 revenue: $1.57B (AWS) vs ~$1.5B (CRM)
      - Q1 2014 revenue: $1.05B vs $1.23B
      - Q1 YoY change: 49% vs ~22%
      - Q1 2015 operating income: 16.9% vs (~3%)
      - Q1 2014 operating income: 23.3% vs (4.5%)
    

Basically for all the talk that Amazon is a low-margin, commodity business
that will never make money, their AWS business at least is doing really well.

I'm not taking anything away from Salesforce, it just happens to be a
similarly sized comparison that most people thinks is a pretty good business.
When compared, AWS looks pretty great!

~~~
kokey
It also means Amazon has massive room to shrink margin to stay competitive.

------
trhway
in the style of Drake equation: $1.5B/quarter, supposedly 1/3 of it is billed
CPU time, at $1/hour per one 1U computer, at 500 hours billed per quarter per
computer we have 1M computers - at 40 boxes per rack we have 25K racks, at 50
racks/row it would be 500 rows, at 50 rows per "warehouse" it will be 10
"warehouses". The storage money and racks i'd suppose is comparable to CPU
boxes in numbers. So in result it would be 10 "warehouses" of 50 rows of 100
racks.

~~~
late2part
I like your approach, and have some thoughts relevant. What's a computer? The
$1/hour revenue is generated by AWS from FAR less than 1U. SuperMicro sells a
2U machine with 4 full sized computers in it with 6 drives. You can put 12
cores in that, and an AWS 'ECU' core is a hyperthreaded core. So, in the
Supermicro "quadnode" [1] version you get 4 * 12 * 2 = 96 cores in 2U, or 48
cores per U. An AWS computer/instance that costs $1/hour is a "m2.4xlarge" [2]
which has 8 cores. So you can sell 6 "Computers" per U with this math.

[1]
[http://mezz.ixsystems.com/servers/families/?family=Gemini4](http://mezz.ixsystems.com/servers/families/?family=Gemini4)
[2] [http://www.ec2instances.info/](http://www.ec2instances.info/)

~~~
trhway
> SuperMicro sells a 2U machine with 4 full sized computers in it with 6
> drives. You can put 12 cores in that

i don't think AMZN or Google put 4 sockets per 1 U. While obviously it is
possible, it would be pretty dense for normally powered chips. My
understanding is that 2 socket/1U is more typical. At 100W/chip it would be a
difference between 8KW and 16KW heat from a rack. But anyway, you're right -
AMZN probably gets more than $1/1U. Their cluster 2-socket (16 real, 32
v-cores) instances go for $3.5/hour. Starting from that number we can adjust
it down somewhat for pre-paid/reserved/spot pricing. Anyway, lets hope
fuzziness in one number is compensated (not amplified :) by fuzziness in
another ... Actually from the 2013 link you posted in the response below (that
one - [https://storageservers.wordpress.com/2013/07/17/facts-and-
st...](https://storageservers.wordpress.com/2013/07/17/facts-and-stats-of-
worlds-largest-data-centers/)):

"Amazon data center- Amazon has around 450,000 servers in its data centers
sited in 7 locations in the world. "

So adjusting for 1+ years of growth (of at least 10-20% as they had 49%
revenue increase) my original estimate was less than 2 times wrong :) Edit:
actually adding storage servers - may be up to 4 times wrong if they have all
1U servers, so the most probable parameter to adjust would be $/1U to
something like $2+/1U.

~~~
virtuallynathan
With the photos released by Google/MSFT/FB and OpenCompute specs they are
putting ~60-96 "1U equivalent" boxes per rack (each with 2x E5-2600 class
CPUs). Getting datacenter densities to 25kW/rack requires a bit of extra work
(Chimneys, containment, etc) but the big guys do this already.

[http://www.intel.co.jp/content/dam/www/public/us/en/document...](http://www.intel.co.jp/content/dam/www/public/us/en/documents/best-
practices/data-center-facilities-paper.pdf) covers it fairly well.

~~~
skuhn
It's totally possible to get to 80 general purpose compute servers to a rack,
with a power draw of around 15kW. I prefer the Supermicro FatTwin, but there
are other options with similar density.

It usually isn't worth going to a mega dense rack (25kW or whatever), because
unless you built the entire site with this in mind, you'll probably run out of
power before you run out of space. Then you spent extra on these extreme
density solutions for no real return. It can still make sense, if the entire
solution is thought out.

------
allworknoplay
Jesus, I'm occasionally amazed at GAAP for not requiring breakout of a
business unit as large as $6 billion (last quarter obviously somewhat less)
simply because the overall company is comparatively large; especially so when
the profitability of the unit is so different from the overall company. Seems
fucking material to me.

~~~
adventured
I believe that's why Amazon went ahead with it. If you don't run into SEC
requirements, you run into aggressive shareholders that will cause you legal
problems trying to force you to reveal the value of such an enterprise.
Suddenly Carl Icahn is breathing down your neck trying to get you to reveal
that info, so they can judge if it should be spun off. The shareholder risk
becomes immense the larger a business like that gets without breaking out any
financial information on it.

~~~
allworknoplay
I think you're correct, it probably just hit 5%. I'm just honestly amazed
given the lack of transparency and risk in super gigantic corporations that
there isn't an absolute dollar threshold for lines of business as well as a
percentage one.

------
rifung
"Since its inception, Amazon has refined and expanded AWS while competitors
including Microsoft and Google have tried to replicate its success with
similar projects. Those companies have only recently started to deliver basic
services on par with Amazon’s."

Is this really true? I know that AWS offers many more services than
competitors currently, but for the services for which there is a competing
product, is the AWS offering really that much better?

~~~
mdeeks
Compared to Azure, yes. The IaaS offering on Azure has many, many limitations.
It is also very difficult to use. There is no general pool of servers. You
have to cram VMs into these groupings called "Cloud Services" which are
limited to 50 VMs each. No support for TLS termination on their load
balancers. SSDs are currently a "preview" feature and only work on a subset of
hardware types.

In all fairness AWS had a 4-5 year head start on Azure. Also there are a lot
of really exciting things coming down the line for Azure. I don't expect this
gap to last long.

Competition is good!

~~~
btown
SSDs, okay. That's something that's legitimately difficult to scale,
particularly if you've invested heavily on spinning disks and made assumptions
about their performance/reliability. I get that.

But no TLS termination? At a company that has invested $15bn on their cloud
products and has in-house expertise on the actual source code of one of the
most widely-used networking stacks? That's... surprising, to say the least.

~~~
nitramafve
What does the lack of SSL termination mean? We are running many services in
Azure which we access using TLS1.2 via the loaf balancer so what would SSL
termination add to this?

~~~
nolok
Wikipedia is short and to the point on this one

> An SSL termination proxy is a proxy server that is used by an institution to
> handle incoming SSL connections, decrypting the SSL and passing on the
> unencrypted request to the institution's other servers (it is assumed that
> the institution's own network is secure so the user's session data does not
> need to be encrypted on that part of the link). SSL termination proxies are
> used to reduce the load on the main servers by offloading the cryptographic
> processing to another machine, and to support servers that do not support
> SSL, like Varnish.

[http://en.wikipedia.org/wiki/SSL_termination_proxy](http://en.wikipedia.org/wiki/SSL_termination_proxy)

------
chatmasta
"These have since become common building blocks of Internet-based computing
systems, supporting companies ranging from large enterprises like Infor US
Inc. and Netflix Inc. to startups such as Instacart Inc."

When I see a brand name mentioned randomly in an arricle, I wonder who paid
for it. Why would Bloomberg mention instacart specifically? Is it common
practice for companies to pay for these subtle pseudo-mentions in articles?

~~~
mblevin
Not paid directly - it's a combination of 1) brands being top of mind 2) what
people / robots will recognize and ever so likely potentially to share or what
will have the tiniest bit of extra SEO juice.

#1 only comes from a lot of ongoing PR outreach, coffee chats, briefings, etc
- which takes time and $$$$ usually via an agency working nonstop on
developing relationships to keep a brand top of mind for side mentions like
this and to be at the top of the rolodex when a reporter needs a quote or some
help understanding an industry or technology space.

~~~
mattzito
It's also entirely possible that the reporter either asked AWS for some
customer names and cherry-picked those, or the reporter asked their network
for some names. In my experience, it's not paid other than in really shady
non-mainstream media sites.

~~~
onewaystreet
It's an interesting question because many more well know startups use AWS
(Airbnb, Pinterest, Etsy, Spotify). Amazon has a webpage specifically to
highlight them: [http://aws.amazon.com/start-
ups/](http://aws.amazon.com/start-ups/). It's hard to imagine that Instacart
would be the startup that would be offered as an example by Amazon or the
reporter's network. It wouldn't surprise me if reporter was friends with the
founders.

------
pokoleo
Judging by the size of the AWS bill that companies pay without a peep, I don't
think anyone here is incredibly surprised.

~~~
philip1209
With reserved instances, prepayment, and other tricks you can about halve AWS
costs at scale.

~~~
toomuchtodo
But still get worse performance than bare metal (noisy neighbors, inconsistent
EBS performance, intra-instance network latency).

Disclaimer: DevOps for AWS and bare metal infrastructure.

~~~
res0nat0r
Sure, virtualized OS' are always going to have some overhead vs. bare metal.

~~~
ericd
My understanding is that the OS virtualization is actually a relatively minor
part of the difference.

------
techtivist
With such slim margins AWS and the larger cloud services industry of today
will become what the airlines industry has become.

~~~
discodave
The barriers for entry to Cloud are actually higher than for airlines IMO. In
the long run it will become more like the utility industry (think electricity)
than airlines.

To get into the same cloud market as AMZN/MSFT/GOOG you are going to need:

1\. Several billion dollars of Capex to get to the same scale as the
incumbents. 2\. A large amount of investment to replicate all the internal
software that Amazon and friends have. 3\. Goodwill from startups and/or
enterprise CIO types.

Getting into the airline business is comparatively easy:

1\. You lease the planes from Boeing or Airbus. 2\. Pilots and other staff are
highly skilled but otherwise fungible. 3\. Marketing through traditional
consumer channels and price comparison engines is very well understood and if
you're willing to eat the losses then growing share is doable.

~~~
fragmede
Getting into the cloud, and getting into the cloud on the same level as
Amazon, Microsoft, or Google are two different things.

Just like getting into the airline business, and getting into the airline
business to compete with the likes of American Airlines, Lufthansa or United
Airlines are two different things.

The same overly simplistic business plan could just as easily be applied to
'getting into Cloud', and while leasing a few business jets off Boeing has
it's own page on boeing.com[1], it's still a significant expenditure.

Here's the same plan:

1\. Lease a pile of servers from Dell or HP

2\. Developers, Sysadmins, and other staff are highly skilled but otherwise
fungible. OpenStack is rapidly maturing so you can take advantage of that.

3\. Marketing, marketing, marketing. Through newer online social media
channels instead and compete on price.

Airlines are famous for making only meager profits, especially considering the
capex required to play.

Since Cloud is still a relatively immature industry, there's still room for
niches, just like the airline industry has regional airlines. All GPU cluster
anybody? Bare-metal Private Servers? Digital Ocean and Rackspace are chugging
along just fine.

How about selling of Cloud services that run on top of AWS? Is that still
Cloud? Dropbox famously started off just running on top of Amazon's S3, and
I'd definitely call them Cloud. How about if you setup Heroku for Erlang?
Scala? No billion dollars of Capex required, and I'd still definitely call
Heroku a Cloud business.

Trying to compete with the likes of Amazon, Microsoft, or Google without
billions of dollars is tilting against windmills, but to say 'getting into
cloud' requires several billion dollars at the outset is a bit of an
overstatement.

[1] [http://www.boeing.com/company/about-
bca/startupboeing.page](http://www.boeing.com/company/about-
bca/startupboeing.page)

~~~
thrownaway2424
"""1\. Lease a pile of servers from Dell or HP

You already lost the game. The entire point of cloud computing is you don't
need any of the features that Dell and HP heap onto their servers. Every port,
every button, every LED costs you another couple hundred mW.

------
colinbartlett
Is there any chance that Amazon might spin off AWS to a separate company? Or
would that be suicide to the stock price of their retail business?

~~~
icpmacdo
What is the advantage to spinning it off to its own company?

~~~
adventured
You do that when the value inside the company is being perpetually vastly
under-represented (combined with shareholders applying a lot of pressure to
unlock, say, a stagnant stock price).

For example, if AWS is worth $100 billion in ten years, and Amazon as a whole
is only being valued at $150 billion in the public market at the time.
Separate the two might be worth $100 billion each at that point.

The argument for eBay spinning off PayPal is this same premise - that PayPal
is being undervalued by a lot hiding inside eBay.

~~~
chatmasta
Amazon is losing money as a whole, but AWS Is profitable. Isn't that the same
concept as PayPal hiding in ebay?

~~~
adventured
eBay is extremely profitable, far more so than PayPal. PayPal's margins are
not particularly impressive.

PayPal however is growing much faster than the auction platform (which is
hardly growing).

The old processors like Visa and Mastercard have had amazing value increases
in the last ten years. Visa is now a $160 billion company with 40% net income
margins. PayPayl is a very attractive target for the big four of Visa,
Mastercard, Discover, Amex. That will drive up its perceived value. One of
those big four is very likely to go after a merger or acquisition of PayPal
after the spin-off.

------
akg_67
This article shows relative "cloud" revenues numbers between Amazon, IBM,
Microsoft, and Google. In this context, Amazon doesn't look that big.

[http://finance.yahoo.com/news/official-amazon-strongest-
clou...](http://finance.yahoo.com/news/official-amazon-strongest-cloud-
business-204718694.html)

~~~
shakethemonkey
That article doesn't support your point, except perhaps for IBM and it's hazy
to me what exactly that revenue is. It's certainly not from the type of
developer-targeted infrastructure services that AWS is.

As for Microsoft, quoting directly from your link: "One person has told
Business Insider that Azure revenue is at $1 billion lifetime since its debut
in 2011, but is accelerating quickly."

~~~
sokoloff
IBM owns Softlayer in addition to internally developed services.

------
MovingWorlds
Interesting to see the after hour stock price jump....
[https://www.google.com/finance?q=NASDAQ%3AAMZN&ei=HXA5VcnWBY...](https://www.google.com/finance?q=NASDAQ%3AAMZN&ei=HXA5VcnWBYSwiQLU2oHQBw)

~~~
Kurtz79
Especially if you hold some shares :)

I thought that the potential profits of cloud business were already being
factored in the current evaluation, but apparently it was more profitable than
the analysts (which were probably imagining the same thin margins as the
retail business) expected.

------
gshakir
I don't think the growth will accelerate as the article claims as the barrier
to entry is becoming less and less each day. It should be interesting to see
how it plays out.

~~~
hyperliner
There are HUGE barriers to entry. What is the reason behind the "barrier to
entry is becoming less and less each day"?

~~~
joshstrange
Not parent but I'd guess they are talking about OpenStack but if they are they
are wrong. Running a data center is no easy or cheap task. Sure you might have
SOME of the logistics cut out for you using OpenStack but the barriers to
entry are still VERY high.

~~~
mblevin
Openstack + spare capacity in a colo facility + a bunch of few years old
servers offloaded in a facilities auction and you can build one pretty
quickly.

Tech isn't the hard part - barriers to get a service up and running are
dropping drastically.

Hard part is marketing & scaling, and as AWS expands services there are risks
from pure-play vendors that do just one slice of the stack 2-3x better than
Amazon does.

~~~
nullrouted
It isn't as easy as you make it sounds, just a few thoughts:

1\. OpenStack still has plenty of bugs and issues you are going to hit.

2\. You'll still need a really good colo facility.

3\. High bandwidth and Multiple internet providers are expensive. If you look
at Amazon they have an excellent blend of bandwidth including direct
connectivity to many eyeball providers (Comcast, Charter, RCN etc.) which
usually makes your data get there quickly and prevents peering bottlenecks.

4\. If you need more than one facility then you just get to double your costs.

5\. People costs, you'll need people that can manage your infrastructure at
scale.

6\. Hardware capex can severely drain companies.

7\. Vendor sprawl and support. (You still may need a CDN, DNS provider, etc.)

Doing your own thing can quickly become much more expensive than Amazon or
other cloud providers.

------
prirun
An alternate view: [http://market-ticker.org/akcs-
www?post=230060](http://market-ticker.org/akcs-www?post=230060)

------
quizotic
Does anyone have insight into AWS revenue per service? Does EC2 generate the
bulk of the revenue? Is Lambda the fastest growth area? How is Redshift doing?

~~~
mentat
I'm sure Amazon knows and, since this is the first aggregate disclosure, that
there's no way they're going to state publicly.

------
snambi
Very Impressive

------
mblevin
TL;DR on AWS

\- $1.57b in revenue in Q12015 on $22.72B total ($5B annualized for AWS)

\- $265m in operating income (net loss for Amazon as a whole was $57m)

Looks like revenue was slightly lower but operating income quite a bit higher
than most Wall Street estimates.

~~~
usaphp
I just don't understand when people use TL;DR and comment on an article they
have not even read.

~~~
Aldo_MX
It's a way to say "to people not interested in reading the entire article,
this is the most important information:"

~~~
mblevin
Yep - the article itself isn't terrible exciting outside of the core AWS
numbers, but this now serves as the place for the HN community to talk about
it - because the numbers are what's interesting.

------
growthape
I believe this happened because companies like
[http://www.cloudways.com/en/](http://www.cloudways.com/en/) are integrating
Amazon cloud infrastructure smartly to build a service for application
developers.

Usually, application developers are not good at server side configurations.
They want something that's easy to setup and help them deploy their
applications like WordPress, Magento, Drupal, Joomla etc.

Companies like Cloudways are taking away a lot of pain and giving those
application developers a chance to easily setup their apps with premium
support.

Don't you think that's attractive? and a business opportunity as well.

~~~
getsat
Shillways. Your comment history is amusing.

