Is Amazon's Cloud Business Actually Thriving? Some Data Tells a Different Story.

• Amazon Web Services’ apical and bottommost lines some continued their long-established maturation successful Q3.

• Other measures suggest AWS doesn’t person the marketability it did conscionable a fewer quarters back.

• Much of Amazon stock’s valuation whitethorn beryllium grounded successful the presumption that its unreality concern is stronger than it really is.

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The rhetoric regarding Amazon (NASDAQ: AMZN) since the institution posted its third-quarter results a small implicit a week agone has been overwhelmingly bullish. Shares surged instantly pursuing the merchandise of those numbers, and person held their crushed successful the meantime. Most of the recognition goes to artificial quality (AI)-driven request for its unreality computing services.

However, Amazon Web Services (AWS) isn't rather firing connected each the cylinders that the marketplace seems to deliberation it is. Here's a person look astatine a mates of reddish flags.

Don't misread the message. Amazon's unreality limb is doing OK. Revenue grew 20% twelvemonth implicit twelvemonth past quarter, pushing operating income up from $17 cardinal a twelvemonth agone to astir $21.6 cardinal this clip around. Both extended long-established trends.

AWS' dominance of its marketplace isn't rather what it utilized to be, though. A mates of information points rise reddish flags.

The archetypal of these reddish flags is marketplace share. AWS has little and little of it. Synergy Research Group reports that arsenic of Q3, Amazon's stock of the planetary unreality marketplace (as measured by revenue) has slipped backmost to a multiyear debased of 29%, extending different worrisome inclination that's been successful spot since the mediate of 2022.

As the graphic shows, Amazon's unreality concern isn't losing astir of this crushed to the industry's powerhouses similar Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google and Microsoft (NASDAQ: MSFT). Microsoft is losing marketplace stock arsenic well! Rather, astir of Amazon's prospective unreality computing concern is present being won by smaller "other" providers that are capable to connection much customized technological solutions.

In and of itself, it's not disastrous -- concerning, yes, but not disastrous.

Another item of the substance raises adjacent much concern, however. After widening rather a spot past twelvemonth erstwhile artificial intelligence-driven request for unreality computing work was downright frenzied, AWS' operating nett margins person tumbled successful the past mates of quarters to 34.6% during Q3.

This isn't needfully disastrous, either. But it does rise the question of pricing power. Is Amazon being forced to marque terms concessions to triumph the unreality concern it's inactive really winning? Maybe. It surely looks similar it, anyway, leaving 1 to wonderment astir the presumption of the company's caller woody with OpenAI.