Why Amazon shares jumped $60 to US$364 this week, and could go higher

The market bid up Amazon 20% on the decision by Amazon to break out the numbers behind Amazon Web Services (AWS) its cloud-based web hosting business. AWS formed a major part of the 40% revenue increase in the “other revenue” line in the 10k filing, which was US$1.74b in the quarter. The market thought AWS was worth $28b (US$60/share) with similar numbers published by the better brokers including Piper Jaffray. Some of the less informed speculation prattled on about upgrading on higher than expected EPS (irrelevant in a company expensing its development costs) but the figures speak for themselves – the filing reveals that AWS could be on track to be 10% (US$6b or more) of total revenue, at which level the SEC demands disclosure as a separate business unit on the basis of materiality. The 20% jump looks like an opening price, while the market digests the news – AWS is already a very significant player with corporate clients like Netflix, Mashable etc.

Disclosure – Loftus Peak clients own Amazon shares