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36% of Amazon's operating profit is now from AWS. That's crazy!
profit is the key word: Amazon has historically operated w/ a profit of slim to none. http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n...
Amazon is notorious for capital expenditures, some of which is probably why AWS exists.
But is it even profitable? Operating profits don't include capex. And data centers full of xeons are expensive.
Operating profits take a charge for depreciation of capital assets over the (tax) economic life of the asset. So, AWS is charged between 1/36 and 1/60th of the value of the server per month for 36 or 60 months. (Exact schedule of depreciation is facts and circumstances dependent.) But it's not like they're making a profit just because the servers are "free". Source: I ran tech ops for an e-commerce company you've lik…
A fascinating post from Benedict Evans looks at Amazon's capex/sales ratio from 2009 and looks at what free cash flow would have been had Amazon preserved that ratio through 2014 instead of incurring massive capex. They would have had another $5B over the year previous to that article. [1] Obviously some of that is warehouses, but unless they speak to how much of that is datacenters, I don't see how anyone can assume aws is actually profitable.
[1] http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n...
It's only a matter of time before they split AWS from Amazon, just wondering why they're waiting so long.
That doesn't make sense. AWS allows Amazon (the retail store) to go very deep into the red and the entire company could still be afloat. There's no reason to distance yourself from the most profitable part of your company.
I wonder how much of that is people forgetting to shut down unused EC2 instances
I wonder how much of that is people forgetting to shut down unused EC2 instances
Yeah, because that's a logical reason they make billions and not because large companies like Netflix (not to mention pretty much every tech startup these days) use them so heavily.
I wonder how much of that is people forgetting to shut down unused EC2 instances
It really feels like they design the thing to make that happen. I got stung for over $100 just as a casual user, because I never guessed that I had to click through all the (slow loading) regions to see the instances and volumes and snapshots I might have burning money. The web interface is a total clusterfuck.
Just like you, I got burned for about a hundred dollars whenever they switched their UI for EC2 to only show instances per region. I have no idea when that change happened, but they weren't loud enough announcing it.
Earlier quoted context omitted.
Operating profits take a charge for depreciation of capital assets over the (tax) economic life of the asset. So, AWS is charged between 1/36 and 1/60th of the value of the server per month for 36 or 60 months. (Exact schedule of depreciation is facts and circumstances dependent.) But it's not like they're making a profit just because the servers are "free". Source: I ran tech ops for an e-commerce company you've lik…
They could well be making that profit exactly because servers are free. AWS operating profit q2: $400m, for a $1.6B/year run rate. A fascinating post from Benedict Evans looks at Amazon's capex/sales ratio from 2009 and looks at what free cash flow would have been had Amazon preserved that ratio through 2014 instead of incurring massive capex. They would have had another $5B over the year previous to that article. [1…
Operating Profit = Operating Revenue - COGS - Operating Expenses - Depreciation & Amortization
AWS Q2 conf call slides: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...
You can see on slide 15 "Segment Results-AWS" that the segment profit for Q2 was $391MM on net AWS sales of $1.842BB. Both numbers are for the quarter.
The article you linked talks about FCF, not operating income, and free cash flow is still hit with, in Amazon's case, what appears to be capital lease payments. (See slides 21 and 22 for the FCF reconciliation for newly acquired capital equipment, which they don't break out at the segment level.)
E&Y audits Amazon's financials. I'm not sure what evidence you have to suggest that Amazon is improperly "not counting" server expenses in AWS profitability numbers, but that would be an extraordinary claim, which would require some substantial evidence to overcome the presumption that E&Y and Amazon finance are correctly reporting.
It is true that E&Y has not signed a full-year audit for a year when AWS broke out AWS P&L separately, as that only happened for two quarters so far.
I wonder how much of that is people forgetting to shut down unused EC2 instances
It really feels like they design the thing to make that happen. I got stung for over $100 just as a casual user, because I never guessed that I had to click through all the (slow loading) regions to see the instances and volumes and snapshots I might have burning money. The web interface is a total clusterfuck.