Market Size UNCONSTRAINED!!! Why AWS is the Best Business of All Time

1. 0:00 – 0:30

   AWS at $80B run-rate and the overlooked metric: contracted backlog

   1. DRDavid Rosenthal0:00

      One of the most amazing stats that, again, one of our friends pointed out to us that I, I tweeted about this, and I posted it on LinkedIn. It's just crazy. AWS today is on an eighty billion dollar revenue run rate, eight zero. That is not the most crazy, impressive, defensible thing about AWS. If you go look in the financials in the ten Q, the latest ten Q from Amazon, they have to report the AWS revenue backlog.

2. 0:30 – 0:34

   What “revenue backlog” means (and why it matters)

   1. BGBen Gilbert0:30

      Basically revenue that's contracted but not recognized yet.

3. 0:34 – 0:55

   The $100B+ backlog shock: AWS could stop selling and still grow into commitments

   1. DRDavid Rosenthal0:34

      These are contracts, you know, mostly with big enterprises of revenue they've signed deals for, but that is not yet recognized. It's gonna be recognized in future quarters. That backlog of committed contractual [laughs] signed revenue is over one hundred billion dollars. I don't even know what to say about that.

4. 0:55 – 1:16

   Cloud migration is still early: more compute/storage remains off-cloud

   1. BGBen Gilbert0:55

      There's a lot more storage and compute not on the cloud than currently in the cloud.

   2. DRDavid Rosenthal1:00

      So Amazon could shut down all sales efforts, stop growing, literally turn off the lights in terms of new business today, and they still have a hundred billion dollars more business that is contractually coming their way.

5. 1:16 – 1:23

   Reconfirming the scale: $80B run rate and compounding dynamics

   1. BGBen Gilbert1:16

      It's insane. So David, you mentioned they're on a, what is it, seventy, eighty billion dollar run rate right now?

   2. DRDavid Rosenthal1:21

      Eighty. Eight zero.

6. 1:23 – 1:49

   Bezos’s 2014 claim: “AWS is market size unconstrained”

   1. BGBen Gilbert1:23

      Well, in twenty-fourteen, Jeff Bezos wrote a memo, the annual memo that comes out, the letter to shareholders, and said that, quote, "I believe that AWS is market size unconstrained."

   2. DRDavid Rosenthal1:37

      [laughs]

   3. BGBen Gilbert1:37

      That was the point at which it was a year before they broke out AWS's financials, and I think it was a six billion dollar run rate business.

7. 1:49 – 2:04

   The “AWS IPO” moment: when financials were broken out in 2015

   1. DRDavid Rosenthal1:49

      When the quote unquote "AWS IPO," which I think Ben Thompson coined that term-

   2. BGBen Gilbert1:54

      Yeah

   3. DRDavid Rosenthal1:54

      ... happened in twenty-fifteen, that was when they reported Q1 twenty-fifteen earnings. At that point in time, AWS was a six billion dollar revenue run rate.

8. 2:04 – 2:23

   AWS as an unregulated utility with massive profit dollars

   1. BGBen Gilbert2:04

      So it was probably like a four billion dollar business when Bezos is like, "Wow, this thing, I think it's unconstrained." It's nuts. I mean, the real story here is Amazon discovered a new unregulated public utility that they could generate enormous margins on.

   2. DRDavid Rosenthal2:21

      Well, enormous for Amazon margins.

9. 2:23 – 2:47

   How big can it get? TAM, growth rates, and no clear ceiling

   1. BGBen Gilbert2:23

      Okay, but in enormous raw dollar margins, absolute dollar margins. This is a business that they can generate billions and billions of dollars in profits by operating and is effectively a public utility. The market size is, I think I said a hundred and twenty billion earlier, but I think that's being conservative, and growing at thirty percent per year with no end in sight of this thing continuing to compound at that rate.

10. 2:47 – 3:43

    AWS as the substrate for modern life: ‘a tax on anything a computer touches’

    1. DRDavid Rosenthal2:47

       You know, I always used to think about and talk about the mega trend of our lifetimes is the Internet, believe in the Internet. That's the bedrock of modern life, and AWS is what powers the Internet. That's true. What I've realized here, it's more than the Internet. It is anything that a computer could touch. AWS takes a tax on that, essentially. Now, to bring it full circle, anything a computer could touch is the Internet. You know, like it's one and the same these days. Jeff is... It's a crazy statement, but I think he's right. It's market size unconstrained.

    2. BGBen Gilbert3:19

       It certainly was in twenty-fourteen, and I wonder if he could even make it now.

    3. SPSpeaker3:22

       [upbeat music] Who got the truth? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth? Who got the truth now? Hmm

Episode duration: 3:44