What Amazon, Microsoft and Google are doing right – CNBC

“AWS has hit a tipping point, and because they hit a tipping point, Jeff [Bezos] has decided to break it down and show you the … revenue. The Street is looking at that and realizing that this is a game changer,” Ganesan said.

Amazon has managed to shake its reputation for posting losses by posting yet another profitable quarter — a trend that could continue, with one major caveat, Mark Mahaney, internet analyst at RBC Capital Markets, told CNBC on Friday.

“We think they’re about to launch a major investment cycle into Asia,” Mahaney said. “That could depress earnings. But I think what the market will do is take a ‘sum-of-the-parts’ approach on this, and look at the ramping profitability in North American retail, and the ramping profitability in AWS, and the market will look through that. But that’s the major investment cycle to worry about.”

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Ben Schachter, analyst at Macquarie Capital also predicted the upward trend would continue for Amazon, noting that competitors such as eBay and Walmart have not posed a “meaningful competitive response” to premium service Prime in a Friday research note.

“Looking at the e-commerce business … growth rate this quarter, the fact that it re-accelerated, considering that they are already by far one the largest market share companies in the world, tells you that business should be worth a lot more,” Youssef Squali, analyst at Cantor Fitzgerald, said. “The unfair competitive advantage that Amazon has that Wal-Mart doesn’t have, that Target doesn’t have, and that eBay doesn’t have is the fact that AWS is highly profitable… . They can continue to subsidize the e-commerce business, and really undercut anybody and everybody in terms of pricing.”

Though Schachter wrote that the sustainability of AWS is “unclear,” the remote computing service seems to be unstoppable in the near term.

“AWS may be the single-most dominant trend in tech today,” Mahaney said Friday on CNBC’s “Squawk on the Street.” “It’s a very large market. This company’s got eight times the share of its closest competitor. There’s only really one big horse in this race, and it’s a business that’s a commodity business, so whoever has the most scale has the lowest costs, can charge the lowest prices, can gain the most market share.”


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