Amazon's Cloud Computing Arm Poised for Explosive Growth
Amazon's (AMZN) Web Services (AWS) segment is often overlooked in discussions about AI and its impact on businesses. However, AWS is actually one of the biggest beneficiaries of the growing demand for cloud computing power.
AWS accounted for around 21% of Amazon's revenue in Q2, but it generated a significant 60% of the company's operating income. This is because cloud computing has much higher profit margins than e-commerce activities, which have historically been razor-thin.
AWS is also growing faster than Amazon's other segments. In Q2, North American commerce sales rose by 16%, while international sales increased by 15%. AWS revenue, on the other hand, grew at a rate of 37% - more than twice that of its e-commerce counterparts.
Amazon is investing heavily in data centers to meet the growing demand for cloud computing power. According to CEO Andy Jassy, Amazon will not have enough computing capacity available by 2026 and 2027, highlighting the massive backlog of $496 billion already on the books.