Amazon Web Services is one of the best businesses in the world. As it has grown, it has become the worlds largest systems operations business and the core part of Amazon. AWS steadily increases its revenues and operating profits while maintaining stable profit margins. This makes it easier to determine its long-term value compared to the other parts of Amazon.
AWS Growing Into Multiple Trillion Dollar Valuation
Although AWS's explosive sales growth over the past decade and a half has moderated, there is a high probability that AWS profits can compound at 15% per year through 2030. This expectation is based on continued revenue growth and the stabilization of operating profit margins above 30% due to increased economies of scale.
AWS's 2030 Valuation Scenarios
In scenarios 1 - 3, AWS revenues grow 15% annually between 2024 and 2030, while operating margins decrease from current levels, and stabilize at 30%.
Scenario 1: Revenues Grow 15% annually, Margins Stabilize at 30%, AWS is valued at 20 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2030
AWS operating profits increase from $37 Billion in 2024 to $71 Billion in 2030
Applying a 20X multiple to operating profits, results in a valuation for of $1.4 Trillion for AWS
Scenario 2: Revenues Grow 15% annually, Margins Stabilize at 30%, AWS is valued at 25 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2030
AWS operating profits increase from $37 Billion in 2024 to $71 Billion in 2030
Applying a 25X multiple to operating profits, results in a valuation for of $1.8 Trillion for AWS
Scenario 3: Revenues Grow 15% annually, Margins Stabilize at 30%, AWS is valued at 30 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2030
AWS operating profits increase from $37 Billion in 2024 to $71 Billion in 2030
Applying a 30X multiple to operating profits, results in a valuation for of $2.1 Trillion for AWS
In scenarios 4 - 6, AWS revenues grow 15% annually between 2024 and 2030, while operating margins stabilize at 35%.
Scenario 4: Revenues Grow 15% annually, Margins Stabilize at 35%, AWS is valued at 20 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2028
AWS operating profits increase from $37 Billion in 2024 to $83 Billion in 2030
Applying a 20X multiple to operating profits, results in a valuation for of $1.7 Trillion for AWS
Scenario 5: Revenues Grow 15% annually, Margins Stabilize at 35%, AWS is valued at 30 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2028
AWS operating profits increase from $37 Billion in 2024 to $83 Billion in 2030
Applying a 25X multiple to operating profits, results in a valuation for of $2.1 Trillion for AWS
Scenario 6: Revenues Grow 15% annually, Margins Stabilize at 35%, AWS is valued at 40 Times Operating Profits
Revenues increase from $102 Billion in 2024 to $237 Billion in 2028
AWS operating profits increase from $37 Billion in 2024 to $83 Billion in 2030
Applying a 30X multiple to operating profits, results in a valuation for of $2.5 Trillion for AWS
What's Is The Most Likely Scenario for AWS's Valuation in 2030?
Revenue Growth: The most likely scenario is that AWS grows its revenues at 15% per year, which aligns with the expected growth of the Global Cloud Computing market.
Source: Market.US
AWS is increasingly focused on faster-growing international markets, making it very possible for revenue growth to surpass 15%. While AWS's explosive double-digit growth may no longer be achievable, it is still experiencing high-teens revenue growth. Over the trailing twelve months through Q2 2024, revenues grew by 19%
Source: Amazon 2024 Q2 Quarterly Results
Operating Margins: with AWS's fastest growth behind it, expect marketing costs to decrease and for operating costs to scale more efficiently.
Source: Visual Capitalist
On the latest investor call, the question of margins was addressed, and the CFO’s response highlighted how even sudden changes can significantly impact operating margins, especially given the increased scale of AWS as it matures.
Source: 2004 Q2 Earnings Call
In 2030 AWS Will Likely Be Worth $2.5 Trillion
AWS has been instrumental in keeping many businesses operational, contributing to its steady growth over the years. While it's uncertain whether AWS will remain a part of Amazon into the next decade or be spun off, there is a high probability that the business will reach a valuation greater than $2.5 trillion by 2030.
This is due to its long-term margins likely stabilizing at 35%, and the potential for AWS to command a 30x multiple, similar to Microsoft, which generated $105.8 Billion in operating profits during FY 2024 and has a market cap of $3 Trillion. (28x Operating Profits).
A $2.5 trillion valuation for AWS in 2030 would exceed Amazon's current total valuation of $1.7 trillion. The value of the non-AWS businesses will be led by Amazon's advertising business, greater global profits from the commerce segment over time, and access to Amazon's ability to incubate massive new business units (i.e delivery drones, robotics, etc.)
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