Amazon Continues To Gain Share In Cloud Infrastructure Services Market

Amazon Web Services (AWS) was unsurprisingly ranked first again in Gartner’s Magic Quadrant for cloud infrastructure services in Q2 2016, followed by Microsoft, IBM (NYSE:IBM) and Google (NASDAQ:GOOGL). Amazon has been a leader in this market since 2006, owing to its wide array of Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (IaaS) offerings, and continues to grow faster than the market, thus consistently improving its share. 

Amazon is aiming to make its cloud offering more comprehensive to counter the increasing competition in the sector. Although the company is the leader in the global cloud infrastructure services market, with a share of over 31%, other major players such as Microsoft, IBM and Google are slowly gaining share and growing at an impressive pace. In Q2 2016, the overall cloud infrastructure services market grew at 51% year-over-year (y-o-y), with Microsoft and Google both growing over 100% over the prior year quarter. AWS sales grew faster than the market at 53% in the previous quarter, but its growth rate has been gradually declining – from 63% in Q4 2015 and 57% in Q1 2016 – likely because of a higher base.

Another important trend to note is that the market share of the top 4 players- Amazon, Microsoft, IBM and Google – has increased from 51% in Q4 2015 to 54% in Q2 2016. This means that the top 4 players are taking share from the smaller players in this market, primarily by adding more functionalities in their offerings and making them more accessible to small and medium sized businesses. Reaching out to all kinds of customers – startups, SMEs and big companies – and enhancing its agility and customization capabilities seems to have been the driving factor behind Amazon’s recent Cloud9 acquisition. The company also opened two data centers in Mumbai, India in June in a bid to accelerate the expansion of its cloud services in the Asia-Pacific region. The new AWS data centers in India will help bring on board more clients and help Amazon tap into the growing demand for cloud infrastructure services from established as well as new players.

AWS Is Amazon’s Most Profitable Division

AWS is Amazon’s most profitable division, contributing over 50% of its profits. Amazon’s increasing focus on constantly improving and expanding its AWS business stems from the fact that it contributes about 56% of the company’s profits and has a considerably higher EBITDA margin than Amazon’s e-commerce business. In 2015, AWS had an EBITDA margin of 30% compared to its company-wide EBITDA margin of just 9%.

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