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This 1 Thing Is Really Bugging Me About Amazon Web Services
Amazon's cash cow isn't quite as competitive now as it's been, raising red flags of its future profitability.
Any investor keeping tabs on e-commerce giant Amazon (NASDAQ: AMZN) probably already knows how important its cloud computing arm is to the company's bottom line. For those who don't, the bulk of its revenue still comes from selling merchandise to online shoppers, 58% of last year's operating profits came from Amazon Web Services, even though this business only made up 17% of Amazon's total sales. That allows Amazon's sizable cloud-based cash flow to help fund a lot of different growth initiatives. And it is!
This proverbial gravy train might not be quite as impressive in the foreseeable future as it's been in the recent past, though. While Amazon Web Services still seems to enjoy a decent degree of pricing power, if AWS' market share trend is any indication, that could be changing soon. This sets the stage for narrower profit margins, and ultimately less net profits.
Image source: Getty Images.
