Analysts see cloud as Amazon's surprise Q4 holiday sweet spot

Analysts see cloud as Amazon's surprise Q4 holiday sweet spot

Summary: Amazon's e-commerce arm might hog most of the spotlight this holiday season, but AWS is the department to watch.

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Following a net loss once again on its third quarter earnings report, analysts are expecting bigger and better results from Amazon next quarter.

That's in large part because the fourth quarter consists of the holiday season, which translates to complete madness for the online retail giant but also typically record sales compared to the rest of the year.

However, while Amazon's e-commerce arm might hog most of the spotlight this holiday season, but Amazon Web Services could truly be the department to watch.

Immediately following the release of Amazon's Q3 balance sheet after the bell on Thursday, Technology Business Research analysts issued a forecast that AWS will hit its first billion-dollar revenue quarter in Q4 2013.

To put that into perspective, Amazon as a whole reported a total revenue of $17.09 billion in Q3. Wall Street expects at least $25.89 billion in Q4, and Amazon itself offered a guidance range of $23.5 billion to $26.5 billion.

The Seattle-headquartered operation typically doesn't break out a lot of sales figures by department, but it didn't shy away from boasting about AWS (among other units) in the Q3 report.

AWS already rolled out more than a dozen improvements and new features during the third quarter, and more are undoubtedly on the way as the cloud services giant revs up for its second annual re:Invent summit in Las Vegas this November.

Additionally, the customer base continues to grow with some high-profile names -- notably in the government, which is becoming a popular hotbed of potential (at least in terms of signing up new cloud-infrastructure-in-need clientele). IBM is just one big competitor that continues to ink deals one after one with federal agencies.

According to the Q3 report, the AWS customer base now includes more than 2,400 education institutions and 600 government agencies, including this recent addition: the U.S. Federal Drug Administration.

TBR analysts also took note of Amazon's "wins in the large enterprise and public sector spaces," estimating that AWS generated $850 million in revenue last quarter, growing by 136 percent year-over-year.

TBR believes AWS will strengthen its portfolio of federal grade products through hiring engineers with top security clearance to work at its 500-person, Northern Virginia-based public sector headquarters opened in August. Furthermore, the public sector headquarters will house dedicated support teams that will provide the necessary level of services to ease government migration to the public cloud.  TBR believes AWS’ shift in strategy to focus on the public vertical (as opposed to a strictly horizontal focus) is driven by high public sector demand and a lack of vendors’ abilities to address this demand.

But it looks more like analysts are banking their opinions (and money) based on AWS's diversity of services available for developers, including the recently launched Appstore Developer Select incentive program.

Yet along with Amazon, analysts also heralded Google and Microsoft as the only other two vendors that have the resources and capabilities to serve developers from cloud to mobile and anywhere in between.

TBR analyst Jillian E. Mirandi concluded, "Amazon is in the early stages of capitalizing on the breadth of these assets and this could be their vehicle to continue their rapid expansion."

Topics: Cloud, Amazon, E-Commerce, Hardware, Tablets

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3 comments
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  • Expect more service outages in Q4

    AWS just doesn't have what it takes to compete with azure. They purely try to scale out iaas. This is what tanks Netflix every holidays. I hope Netflix has made a secret unannounced migration to azure they can throw a switch over to before AWS takes them down again. And btw azure has much better offerings for fed and state governments than aws too. They are hands down leading this space. And if you need big data it's the only cloud platform that has game.
    Johnny Vegas
    • Re: Expect more service outages in Q4

      @ Johnny Vegas
      Please stop trolling. Thanks.
      ocyl
  • Amazon is a pig, and the analysts in this report are putting lipstick

    on a hog which doesn't really have a good plan to turn decent profits.

    Like I said in another discussion, Amazon is just a Ponzi scheme, where investors are hoping to gain value for their stock by creating the appearance of a healthy stock by continuing to bring the price of the stock to higher prices.

    And, like I said in the other discussion, Facebook and Twitter are also, basically, Ponzi schemes. They're not producing enough profits to merit the high stock prices. What these companies are good at, is spending other people's money (the stockholders) to spend and create illusions of "future earnings".
    adornoe