Is AWS in Trouble?

By Douglas A. McIntyre Updated Jul 1, 6:47AM EDT · Published Jun 30, 7:23AM EDT

24/7 Insights

Amazon Web Services (AWS) appears to be struggling but has implemented a way to keep sales rising quickly.

Amazon Web Services (AWS), the Amazon.com Inc. (NASDAQ: AMZN | AMZN Price Prediction) cloud computing division, has held first place in the sector worldwide for years. Microsoft Corp. (NASDAQ: MSFT) is in second place and is gaining. AWS appears to be struggling but has implemented a way to keep sales rising quickly.

CNBC states, “Amazon Web Services is doubling the value of credits that some startups can use on its products from $100,000 to $200,000.” The news channel speculates that Microsoft’s lead in artificial intelligence (AI) has helped it improve the attractiveness of its cloud products. Many observers believe that Microsoft’s relationship with OpenAI has given it that lead in most AI-based products.

Some signs are that Amazon is playing catchup with Microsoft’s AI initiatives. Reuters reports that recently, “Amazon.com announced a new artificial intelligence chip for its cloud computing service as competition with Microsoft to dominate the market for artificial intelligence heats up.” Amazon also announced it would let clients use their AI products on AWS instead of the AWS products.

AWS is critical to Amazon’s financial success. AWS was only $25 billion of Amazon’s $143 billion total in the most recent quarter. Its operating income for the same period was $9.4 billion compared to Amazon’s total of $15 billion.

It is hard to overstate what AWS means to Amazon’s share price. So far this year, Amazon’s stock price is up 27%, while the S&P 500 is up about 19%. Amazon must show that it can keep AWS as the sector’s number one service or risk the premium it trades compared to the market. The recent rally in Microsoft could be in trouble.
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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.