AWS’s Share of Amazon’s Profit

I’ve often heard it said that AWS is a major contributor to the Amazon’s profitability. How major? Here’s a graph covering the last nine quarters, with a brief methodology discussion:

I think this is a useful number to observe as time goes by, and it would be good if we generally agree on how to compute it. So here’s how I did it.

Start at the Quarterly Results page at ir.amazon.com . It only has data back through 2018 which seems like enough history for this purpose. Let’s take a walk through, for example, the Q1 2020 numbers .

Please note: I have zero inside knowledge about the facts behind these numbers. Every word here is based on publicly available data.

It’s easy to identify the AWS number; search in the quarterly for “Segment Information” and there it is: Net sales $10,219M, Operating expenses $7,144M, Operating Income $3,075M. So if we want to know the proportion of Amazon profits that are due to AWS, that’d be the numerator.

So what’s the denominator? Since the AWS results exclude tax, so should the Amazon number. Search for “Consolidated Statements of Operations” and there are two candidates: “Operating Income” and “Income before income taxes”. The first has the same name as the AWS line, so it’s a plausible candidate. But it excludes net interest charges and $239M of unspecified “Other income”.

This is a little weird, since interest is a regular cost of doing business. It might be the case that the interest expense is mostly due to financing computers and data centers for AWS, or alternatively that it’s mostly financing new fulfillment centers and trucks and planes and bulk buys of toilet paper. And then there’s the “Other income”.

If we assume that the “Other income” and net interest gain/loss is distributed evenly across AWS and the rest of Amazon, then you should use the “Operating” line. I’m not 100% comfy with that assertion, so I made a graph with both lines, and I think it’s likely the best estimate of AWS’s proportion of Amazon’s income falls in the space between them.

So, if this graph is right, then over the last couple of years, somewhere between 50% and 80% of Amazon’s profit has been due to AWS. Glancing at the graph, you might think the trend is up, but that verges on extrapolation, I’d want to wait a couple more quarters before having an opinion.

Since I’m not a finance professional, I may have gone off the rails in some stupidly obvious way. Sohere’s the .xlsx I used to generate the graph. I used Google Sheets, so I hope it doesn’t break your Excel.

Please let me know if you find any problems.