Amazon Profitability Chart

How Important is Web Services to Amazon?

Did Amazon create a massive retail business just to scale its cloud infrastructure?  While this is not very plausible, Amazon’s latest quarterly results point to the potential of Web Services to be more profitable than Amazon’s core retail business in the coming years.  The chart below shows that the cloud business is still only 8% of sales, but it generates 36% of profits and its profitability is growing at nearly 4x the rate of the retail business.  It is based on Amazon’s latest quarterly results.

Amazon Profitability Chart

The 100% stacked bar chart shows the proportion of Amazon’s sales (1st bar) and profits (2nd bar) that come from web services as compared to the retail business.  I used the red color to emphasize web services and linking lines between the bars to show highlight the differences between sales and profits.  I showed percentages in the chart and totals at the top of each bar and a legend.  Each of these decisions helped emphasize the point that web services made a larger contribution to profit than to sales.  I also added two data columns so that I could show growth in sales and profits as well as current period results in the same chart.  I extended the red color (and added bold) to the web services growth numbers.  In Amazon’s quarterly results, US and International sales were split.  I combined the two in this graph as my focus was on comparing web services to Amazon’s traditional business.  Here is the chart in SlideShare to download and edit: