Amazon Revenue Growth Slowing — Cause for Worry?

Amazon Web Services (AWS) has hit an interesting point in its evolution as a business. The company is by far the dominant leader in the infrastructure-as-a-service (IaaS) space—a technology category it arguably created.

Although Microsoft (MSFT) is nipping at its heels, Azure still has a long way to go to catch up. And some believe it will catch up in time. But as Microsoft’s IaaS year-over-year growth looks rather impressive, Amazon’s year-over-year growth is starting to look less so. But don’t let that fool you; Amazon is still growing, but its annual growth rate is slowing, according to an essay on investment blog Seeking Alpha.

Independent investor Akshay Kaul noted in his essay that although Amazon will continue to grow, it will be at “progressively slower rates.” Not surpising at all, considering Amazon is a $50 billion business; and with that in mind, the company has grown so big that it simply can’t keep up the same percentage-based revenue growth.

For the last 11 years, Amazon has grown at an average rate of 31 percent, Kaul wrote, but since 2012—when it hit that $50 billion mark—its growth has slowed. Kaul includes revenue across the entire spectrum of Amazon’s business, but he also noted that although growth is slowing, the cloud business is “the big unknown. Most analysts agree this will grow faster than the rest of the business, but by how much?”

One can’t argue with Amazon’s success, first as an online book reseller and then later as a cloud computing leader. A slowdown in growth means little except for investors. And even as growth slows, its cloud computing revenue is still shooting upwards.

As the cloud market matures, every cloud provider will start to experience a growth slowdown. As businesses get larger, it’s difficult to keep up such momentum.