10-28-2017, 05:08 AM
A good comment form mtachjian:
Well The Amazon Earnings Report is in. AWS is up 11.8% sequentially....They went from $4.1B to $4.584B in that business over the quarter. They announced Amazon Key(cloud home security), VMware to their cloud, new infrastructure in the middle east in 2019, and AWS GovCloud--They are gonna provide cloud service for the DoD (non classified). Cloud is growing explosively.
9months ended Sept 30,2017--$12,346M sales-$9,369M -expenses So aprox 75.8% ratio
6months ended June 30,2016--$5,452M sales-$4,131M -expenses So aprox 75.7% ratio
9months ended Sept 30,2016--$8,683M sales-$6,501M -expenses So aprox 74.8% ratio
It appears like AWS spent 1.8% less this quarter or about $82mil
If you use Q2 number of 77.6%, the difference is 3.1% or $144.4M less spent this quarter than expected.
So AWS cloud business is growing 40%+ pace. Now lets test AOi's explanation for the down quarter versus Amazons reported numbers.
DID AMAZON SPEND LESS THIS QUARTER?
Heres what I noticed. I'd love to hear what others think.
If you look at Amazons AWS sales/expenses as a percentage ---
6months ended June 30,2017--$7,761M sales-$5955M -expenses So aprox 76.7% ratio
9months ended Sept 30,2017--$12,346M sales-$9,369M -expenses So aprox 75.8% ratio
6months ended June 30,2016--$5,452M sales-$4,131M -expenses So aprox 75.7% ratio
9months ended Sept 30,2016--$8,683M sales-$6,501M -expenses So aprox 74.8% ratio
So we see a trend of about 75% in 2016 and 76% in 2017 expenditure to each dollar of revenue. In the 2nd quarter for AWS this year (when AOi got a big chunk of sales from them.) here was their spend.
Q2--$4100M=sales $3184=expenses So aprox 77.6% ratio
So Spend was trending 76% and Q2 was 77.6%
IF AOi and other companies who sell to AWS are right that this quarter was just a pause as they ramp up to 100G. We would expect a dip in this ratio. Their expenses should be less. AWS has many facets, so its not just cloud or data center specific. But I feel it is as good a proxy as we can get.
So what did AWS report yesterday (Oct 26)?
AWS Q3 report...
Q3--$4,584M=sales $3,413=expenses So aprox 74.45% expense ratio! Much lower that the average for the year and significantly lower last quarter.
If you use the previous 9months average of 76.2% vs Actual 74.45%.
It appears like AWS spent 1.8% less this quarter or about $82mil
If you use Q2 number of 77.6%, the difference is 3.1% or $144.4M less spent this quarter than expected.
Of course we dont know what these spends relate to. They could be cloud or something else. What is important is that its clear that AWS spent considerably less this quarter than expected and what they have been spending. This is consistent with AOis story as to VMI pull down.
AWS isn on page 9 here
Well The Amazon Earnings Report is in. AWS is up 11.8% sequentially....They went from $4.1B to $4.584B in that business over the quarter. They announced Amazon Key(cloud home security), VMware to their cloud, new infrastructure in the middle east in 2019, and AWS GovCloud--They are gonna provide cloud service for the DoD (non classified). Cloud is growing explosively.
9months ended Sept 30,2017--$12,346M sales-$9,369M -expenses So aprox 75.8% ratio
6months ended June 30,2016--$5,452M sales-$4,131M -expenses So aprox 75.7% ratio
9months ended Sept 30,2016--$8,683M sales-$6,501M -expenses So aprox 74.8% ratio
It appears like AWS spent 1.8% less this quarter or about $82mil
If you use Q2 number of 77.6%, the difference is 3.1% or $144.4M less spent this quarter than expected.
So AWS cloud business is growing 40%+ pace. Now lets test AOi's explanation for the down quarter versus Amazons reported numbers.
DID AMAZON SPEND LESS THIS QUARTER?
Heres what I noticed. I'd love to hear what others think.
If you look at Amazons AWS sales/expenses as a percentage ---
6months ended June 30,2017--$7,761M sales-$5955M -expenses So aprox 76.7% ratio
9months ended Sept 30,2017--$12,346M sales-$9,369M -expenses So aprox 75.8% ratio
6months ended June 30,2016--$5,452M sales-$4,131M -expenses So aprox 75.7% ratio
9months ended Sept 30,2016--$8,683M sales-$6,501M -expenses So aprox 74.8% ratio
So we see a trend of about 75% in 2016 and 76% in 2017 expenditure to each dollar of revenue. In the 2nd quarter for AWS this year (when AOi got a big chunk of sales from them.) here was their spend.
Q2--$4100M=sales $3184=expenses So aprox 77.6% ratio
So Spend was trending 76% and Q2 was 77.6%
IF AOi and other companies who sell to AWS are right that this quarter was just a pause as they ramp up to 100G. We would expect a dip in this ratio. Their expenses should be less. AWS has many facets, so its not just cloud or data center specific. But I feel it is as good a proxy as we can get.
So what did AWS report yesterday (Oct 26)?
AWS Q3 report...
Q3--$4,584M=sales $3,413=expenses So aprox 74.45% expense ratio! Much lower that the average for the year and significantly lower last quarter.
If you use the previous 9months average of 76.2% vs Actual 74.45%.
It appears like AWS spent 1.8% less this quarter or about $82mil
If you use Q2 number of 77.6%, the difference is 3.1% or $144.4M less spent this quarter than expected.
Of course we dont know what these spends relate to. They could be cloud or something else. What is important is that its clear that AWS spent considerably less this quarter than expected and what they have been spending. This is consistent with AOis story as to VMI pull down.
AWS isn on page 9 here