Datastream
AWS: Powering the Internet and Amazon’s Profits
The Briefing
- Cloud computing has become a hugely important element of Amazon’s business
- In 2021, AWS accounted for 13% of Amazon’s revenue, but clocks in nearly three-quarters of their operating profit
AWS: Powering the Internet and Amazon’s Profits
The Amazon growth story has been a remarkable one so far.
On the top line, the company has grown every single year since its inception. Even in going back to 2004, Amazon generated a much more modest $6.9 billion in revenue compared to the massive $469 billion for 2021.
Most of these sales come from their retail and ecommerce operations, which the company has come to be known for. However, on the bottom line, the source of profit paints a completely different picture. That’s because 74% of Amazon’s operating profit comes from Amazon Web Services (AWS).
Here’s a closer look at the financials around Amazon and AWS:
| Year | AWS Operating Profit ($B) | Total Operating Profit ($B) | AWS % of Operating Profit | Revenue ($B) |
|---|---|---|---|---|
| 2021 | $18.5 | $24.8 | 74% | $469.8 |
| 2020 | $13.5 | $22.9 | 59% | $386.1 |
| 2019 | $9.2 | $14.5 | 63% | $280.5 |
| 2018 | $7.2 | $12.4 | 58% | $232.8 |
Ultimately, the data suggests that the cloud business has been, and possibly will always remain, a higher margin business and consistent profit center in comparison to ecommerce and the physical distribution of goods.
A Glance at AWS
AWS is Amazon’s cloud computing service that provides the critical infrastructure for an assortment of applications like data storage and networking. With this, they help fuel over a million organizations including businesses like Twitter and Netflix and even both the U.S. and Canadian Federal Governments.
Here are some other notable entities and the monthly payments they’ve made towards AWS:
| AWS Customer | Monthly Payments ($M) |
|---|---|
| Netflix | $19 |
| Twitch | $15 |
| $13 | |
| $11 | |
| Turner Broadcasting | $10 |
| BBC | $9 |
| Baidu | $9 |
| ESPN | $8 |
| Adobe | $8 |
| $7 |
Source: Continho (2020)
Based on these monthly figures from 2020, AWS collects $1.3 billion in sales a year just from these 10 customers, while raking in $62 billion of revenue overall. Moreover, this makes them the leader in the competitive cloud market.
In an industry worth an excess of $180 billion, Amazon’s 33% market share position exceeds both Google and Microsoft (Azure) combined. Their market share also surpasses the bottom six shown on the chart combined, who are formidable tech giants in their own right.
The Future of AWS?
AWS has been a cash cow for years and there have even been rumors of an Amazon split up, where AWS would spin off as its own entity. It’s believed by some that if the cloud segment of the business separates, it will be seen as a pure play on the cloud industry and will be awarded a higher valuation multiple by the market.
One thing is for sure, from the perspective of profits, Amazon could be better be described as a cloud company, with an ecommerce business on the side.
Where does this data come from?
Source: Amazon SEC Filings
Notes: Operating profit is the profit from the business before the deduction of non-operating expenses like interest and taxes.
Economy
Charted: Public Trust in the Federal Reserve
Public trust in the Federal Reserve chair has hit its lowest point in 20 years. Get the details in this infographic.
The Briefing
- Gallup conducts an annual poll to gauge the U.S. public’s trust in the Federal Reserve
- After rising during the COVID-19 pandemic, public trust has fallen to a 20-year low
Charted: Public Trust in the Federal Reserve
Each year, Gallup conducts a survey of American adults on various economic topics, including the country’s central bank, the Federal Reserve.
More specifically, respondents are asked how much confidence they have in the current Fed chairman to do or recommend the right thing for the U.S. economy. We’ve visualized these results from 2001 to 2023 to see how confidence levels have changed over time.
Methodology and Results
The data used in this infographic is also listed in the table below. Percentages reflect the share of respondents that have either a “great deal” or “fair amount” of confidence.
| Year | Fed chair | % Great deal or Fair amount |
|---|---|---|
| 2023 | Jerome Powell | 36% |
| 2022 | Jerome Powell | 43% |
| 2021 | Jerome Powell | 55% |
| 2020 | Jerome Powell | 58% |
| 2019 | Jerome Powell | 50% |
| 2018 | Jerome Powell | 45% |
| 2017 | Janet Yellen | 45% |
| 2016 | Janet Yellen | 38% |
| 2015 | Janet Yellen | 42% |
| 2014 | Janet Yellen | 37% |
| 2013 | Ben Bernanke | 42% |
| 2012 | Ben Bernanke | 39% |
| 2011 | Ben Bernanke | 41% |
| 2010 | Ben Bernanke | 44% |
| 2009 | Ben Bernanke | 49% |
| 2008 | Ben Bernanke | 47% |
| 2007 | Ben Bernanke | 50% |
| 2006 | Ben Bernanke | 41% |
| 2005 | Alan Greenspan | 56% |
| 2004 | Alan Greenspan | 61% |
| 2003 | Alan Greenspan | 65% |
| 2002 | Alan Greenspan | 69% |
| 2001 | Alan Greenspan | 74% |
Data for 2023 collected April 3-25, with this statement put to respondents: “Please tell me how much confidence you have [in the Fed chair] to recommend the right thing for the economy.”
We can see that trust in the Federal Reserve has fluctuated significantly in recent years.
For example, under Alan Greenspan, trust was initially high due to the relative stability of the economy. The burst of the dotcom bubble—which some attribute to Greenspan’s easy credit policies—resulted in a sharp decline.
On the flip side, public confidence spiked during the COVID-19 pandemic. This was likely due to Jerome Powell’s decisive actions to provide support to the U.S. economy throughout the crisis.
Measures implemented by the Fed include bringing interest rates to near zero, quantitative easing (buying government bonds with newly-printed money), and emergency lending programs to businesses.
Confidence Now on the Decline
After peaking at 58%, those with a “great deal” or “fair amount” of trust in the Fed chair have tumbled to 36%, the lowest number in 20 years.
This is likely due to Powell’s hard stance on fighting post-pandemic inflation, which has involved raising interest rates at an incredible speed. While these rate hikes may be necessary, they also have many adverse effects:
- Negative impact on the stock market
- Increases the burden for those with variable-rate debts
- Makes mortgages and home buying less affordable
Higher rates have also prompted many U.S. tech companies to shrink their workforces, and have been a factor in the regional banking crisis, including the collapse of Silicon Valley Bank.
Where does this data come from?
Source: Gallup (2023)
Data Notes: Results are based on telephone interviews conducted April 3-25, 2023, with a random sample of –1,013—adults, ages 18+, living in all 50 U.S. states and the District of Columbia. For results based on this sample of national adults, the margin of sampling error is ±4 percentage points at the 95% confidence level. See source for details.
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