Amazon’s cloud computing business is growing fast, and by some estimates, it could be worth well-over $US160 billion if it was a standalone business.
According to a note by Deutsche Bank on Tuesday, Amazon Web Services is forecast to make $US16 billion in revenue by 2017, and based on a 10x multiple, it would get a valuation of roughly $US160 billion.
“We conclude that a 2017 revenue multiple of 10x seems fair for AWS, which given our 2017 AWS revenue estimate of $US16 billion implies a valuation of $US160 billion,” the note said.
The note derived the 10x multiple by comparing AWS to some of its peers in the enterprise space, like Salesforce, Workday, and Google, who had a median 2016 revenue multiple of 9x. It also factored in the fact that AWS is facing a massive market opportunity in the cloud computing space, and that it’s growing at a much faster clip than others, even though it’s already been almost 10 years since its launch.
“Measured by revenues, AWS is approximately 6x larger than its biggest rival Microsoft Azure and is arguably the greatest disruptive force in the entire enterprise technology market today,” the note said.
That would make AWS worth almost as much as Oracle, which has a market cap of $US170 billion, and nearly triple the size of Salesforce, one of the fastest growing cloud software maker with a $US50 billion market cap.
That may sound ridiculous, but not when you think of AWS’s impressive growth over the years. In its most recent quarter, AWS grew 78% year over year, reporting $US2.1 billion in revenue, after growing another 81% in the quarter before that. Plus, it’s profitable at $US521 million last quarter, giving it a healthy 25% margin.
Based on that growth, Deutsche Bank says AWS could be the fastest growing enterprise tech company ever. AWS launched in 2006, and is forecast to surpass the $US10 billion revenue mark on its 10th anniversary next year. By comparison, it took 9 years for Google to hit $US10 billion and 10 years for Facebook. Oracle and Microsoft each took 23 and 22 years, respectively, to pass the $US10 billion milestone.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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