Market Overview

Amazon Web Services Is 'Destroying' Its Competition

Amazon Web Services Is 'Destroying' Its Competition

Just how good is, Inc. (NASDAQ: AMZN)'s AWS segment? According to Trip Chowdhry of Global Equities Research, the answer may be summed up as epic and historical.

Amazon reported its second-quarter results after Thursday's market close and said that its AWS segment saw a year-over-year growth rate of 58 percent on an annual revenue run rate of more than $12 billion. The segment also reported an operating margin of 35 percent.

Related Link: Amazon Reports Strong Bottom Line Beat, Operating Income Surges YoY

"Never in the history has any company been able to accomplish this kind of growth and operating margin, on a revenue base of >$12 billion," the analyst wrote.

Chowdhry added that Amazon's quarterly results reaffirm his belief there will only be two SuperCloud vendors in the market: Amazon's AWS and Microsoft Corporation (NASDAQ: MSFT).

Meanwhile, on-premise hardware vendors, such as NetApp Inc. (NASDAQ: NTAP) and software vendors including VMware, Inc. (NYSE: VMW) are "on borrowed time."

The analyst stated that the market is moving away from these old-school vendors and "will never come back." In fact, the on-premises vendors will see their total available market shrink by 40 percent, and fundamental investors are cautioned to avoid these companies.

Finally, Chowdhry said he will publish a multi-part Amazon AWS report over the next two to three months, which will take a deeper dive into the competitive landscape and Amazon's AWS impact on the many on-premise vendors.

At time of writing, Amazon was up 2.14 percent in Friday's pre-market, seen trading at $768.70.

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