Amazon.com, Inc. (NASDAQ:AMZN) could be sitting on a cloud gold mine, this according to value investor Bill Miller at the Delivering Alpha conference. LMM’s chief investment officer added that investing on cloud services “could prove to be huge” for the company with its shares doubling in 3 years.
Miller notes that fueling the gains could also boost revenue growth and margin expansion in Amazon’s rapidly growing web services businesses while continuing dominance in the online retail market. The veteran stock picker predicted Amazon’s 25% to 30% growth in revenue within a few short years.
AWS, or Amazon Web Services, is an expansive cloud computing platform launched in 2006. Since its debut, AWS has been providing online services to various websites. In addition, the service has expanded its availability to the international markets and within the trade industry, which could contribute to Amazon’s burgeoning growth.
Miller is not alone on predicting Amazon’s very profitable future in the cloud-computing segment. In an interview back in May, former Apple Inc. (NASDAQ:AAPL) CEO John Sculley said that AWS has a lot of potential. At the rate its going, the online retail giant is set to surpass even Google or Microsoft.
If you were to break AWS out as an independent company now, they would be the largest cloud company and be worth a $100 billion,” Sculley said. “You have to have incredible respect for what Jeff Bezos has done with Amazon Web Services. That business didn’t exist six and a half years ago. You see everyone racing to catch up with Amazon, whether it’s Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL) or IBM — so huge success story for Amazon here.”
These evaluations are not mere exaggeration at all. In fact, reports show that Amazon’s cloud business generated a staggering $2.9 billion in revenue during the second quarter, a 58% growth compared to the same period last year. In addition, the segment’s operating income – which excludes stock-based compensation – tallied $863 million, a large jump from $391 million during the same quarter last year. In addition, Amazon’s shares have jumped more than 43% since fiscal 2015.
In the past four quarters, Amazon’s cloud computing company generated $9.9 billion in revenue, putting Amazon on track to surpass the $10 billion annual sales goal executives set on a call with analysts back in April.
The unprecedented growth of Amazon’s AWS is bolstered by the company’s aggressive investment in extending its services for small and large size companies. Amazon has launched 422 new cloud services in the first half of the year alone. The e-commerce titan is moving at a much faster pace than when it launched 722 new features and services in 2015.
Miller noted that Amazon would continue to see growth in revenue and margin expansion, adding that it will dwarf larger, more established conglomerates in variety of segments, particularly in the advertising market.
Amazon shares are up nearly 13% year-to-date and are currently trading around $763.