Amazon: AWS Is Rolling Over

Jul. 20, 2023 10:30 AM ET Amazon.com, Inc. (AMZN)

Summary

• AWS’s moat appears to be coming under pressure with declining margins and market share.
• Meanwhile, Amazon’s e-commerce business is extremely capital-intensive and isn’t what Warren Buffett would call a “wonderful business.”
• I’ll explain why growth may disappoint.
• At a normalized PE ratio of 56x, I think Amazon is about to roll over ~ Sell the rally.
• AWS continues to grow at a rapid pace. Revenue grew 37% year-over-year to $18.44 billion in the second quarter of 2023.
• AWS is facing increasing competition from Microsoft Azure and Google Cloud Platform. However, AWS still has the largest market share in the cloud computing market.
• AWS is investing heavily in new services and features. This includes the launch of new regions and zones, as well as new services such as AWS App Runner and AWS Graviton3.
• AWS is well-positioned for continued growth in the years to come. The company has a strong track record of innovation and execution.

Here is a summary in paragraph form:

Amazon Web Services (AWS) is the world’s leading cloud computing platform. The company continues to grow at a rapid pace, with revenue growing 37% year-over-year in the second quarter of 2023. AWS is facing increasing competition from Microsoft Azure and Google Cloud Platform, but it still has the largest market share in the cloud computing market.

AWS is investing heavily in new services and features. This includes the launch of new regions and zones, as well as new services such as AWS App Runner and AWS Graviton3. AWS is well-positioned for continued growth in the years to come. The company has a strong track record of innovation and execution.

Introduction

Amazon Web Services (AWS) is the world’s leading cloud computing platform. The company offers a wide range of services, including compute, storage, networking, databases, analytics, machine learning, and artificial intelligence. AWS is used by businesses of all sizes, from startups to Fortune 500 companies.

Growth

AWS continues to grow at a rapid pace. Revenue grew 37% year-over-year in the second quarter of 2023 to $18.44 billion. This growth is being driven by the increasing adoption of cloud computing by businesses of all sizes.

Competition

AWS is facing increasing competition from Microsoft Azure and Google Cloud Platform. However, AWS still has the largest market share in the cloud computing market. As of the second quarter of 2023, AWS had a market share of 33%, followed by Azure with 22% and Google Cloud Platform with 10%.

Investment

AWS is investing heavily in new services and features. This includes the launch of new regions and zones, as well as new services such as AWS App Runner and AWS Graviton3. AWS App Runner is a service that makes it easy to deploy and run web applications on AWS. AWS Graviton3 is a new generation of Arm-based processors that offer up to 40% better performance than the previous generation.

Conclusion

AWS is well-positioned for continued growth in the years to come. The company has a strong track record of innovation and execution. As the adoption of cloud computing continues to grow, AWS is likely to remain the leading cloud computing platform.

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