Apple Is 1/10th Of Amazon AWS Revenue: What If It Stops Buying?
- Amid volatility, shares of Amazon.com, Inc. (NASDAQ: AMZN) have lost 13 percent since January 4.
- Morgan Stanley’s Brian Nowak maintained an Overweight for the company, with a price target of $800.
- With signs of Apple Inc. (NASDAQ: AAPL) moving away from AWS, one of the key factors to monitor would be AWS's ability to continue to gain market share, Nowak stated.
Apple had recently indicated that data center expenditures would be among the main drivers of its expected 2016 capex growth, which it projected at 30 percent year-over-year. Analyst Brian Nowak wrote that Apple is estimated to be building a total of about 2.5 million square feet of data centers to power iCloud storage, iTunes, App Store and other services.
This compares to nearly 40 percent of AWS's 6.7 million square feet in data center capacity at the end of 2015, Nowak pointed out, while adding that this could be a signal of Apple “looking to move away from AWS” over the next 18 to 24 months.
The analyst also estimated Apple to spend $1.05bn on AWS in 2016 and $1.18 billion in 2017, which means that Apple would represent 9 percent of the estimated AWS revenue for 2016.
In the report Morgan Stanley noted, “The loss of Apple's ~$1bn annual spend could materially impact AWS's revenue growth (and potentially overall profitability). As such, it will be important to monitor when Apple completes its data center build and the pace at which it transitions away from AWS.”
Nowak mentioned that AWS is targeting an addressable market of $240 billion, and growing. So, the ability of AWS to grow faster than expected would lower the impact of a potential Apple loss.
Latest Ratings for AAPL
|Jan 2017||OTR Global||Downgrades||Negative|
|Jan 2017||Guggenheim||Initiates Coverage On||Buy|
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.