Amazon's AWS Outage Will Shed 2% Revenue: Here Is The Math Behind The Number

Trip Chowdhry of Global Equities Research commented earlier this week that Amazon.com, Inc. (NASDAQ: AMZN)'s AWS outage will have a 2-percent impact on the segment's first-quarter revenue.

Chowdhry followed up in a new report on Friday and explained the math behind his claim since it does seem like a large chunk of revenue for just five hours of outage.

The analyst explained that Amazon's AWS segment guarantees SLA's' (service level agreement) of 99.95 percent and offers a 10 percent service credit if SLA's fall below 99.95 percent.

Related Link: The Way Amazon Handled Its AWS System Outage: 'Bad Business'

The Math

February has 28 days (20 days excluding weekends), and the outage occurred at peak load times of around 8:30 a.m. until around 2:00 p.m. ET.

"Availability, considering 5 hours of downtime on 20 working days of February month = 475 hours/480 hours = 98.9 percent, which is less than 99.95 percent SLA requirement," Chowdhry explained. "AWS Revenues in February will be impacted by the following: 5 hours of downtime because of outage = about 1 percent of revenues for the month of February
Missing the SLA of 99.95 percent for February means giving out 10 percent as Service Credits."

Bottom line, many of AWS's customers that were affected include Apple Inc. (NASDAQ: AAPL), Adobe Systems Incorporated (NASDAQ: ADBE) and Netflix, Inc. (NASDAQ: NFLX) all have negotiated individual SLA penalties ranging from 10 percent and as high as 30 percent so the 2 percent quoted impact to Amazon's AWS revenue could prove to be a conservative assumption.

Image Credit: By Unknown - AWS, Public Domain, via Wikimedia Commons