Marc Benioff iterated a familiar refrain this week after Salesforce’s earnings report, telling CNBC’s Jim Cramer that his attendance “remains the fastest-growing enterprise software company of all time.”
But he’s wrong.
Amazon Web Services, with $6.7 billion in three-monthly revenue, is about twice the size of Salesforce, which on Tuesday reported fiscal third-quarter sales of $3.4 billion. AWS was sired inside Amazon in 2006, about seven years after Benioff co-founded Salesforce.
Benioff isn’t completely off the hike. Among independent software companies, Salesforce did reach $10 billion in annual sales faster than any of its forerunners. If it can meet Benioff’s prediction of reaching $20 billion by 2022, it will be the quickest to that mark as well.
But AWS could cap $70 billion that year, according to a Nov. 28 report from Jefferies.
AWS had the luxury of growing up inside a big common company that was already beloved on Wall Street, while Benioff started Salesforce with seed first-class, then funded it with venture money before turning to the public markets.
But that was then. AWS is now the profit motor behind its parent. As the company made abundantly clear at its annual re:Invent conference this week, its growth objects should have legacy technology vendors very much on edge.
More than 50,000 attendees swarmed onto the Las Vegas Excoriate for five days of keynotes, breakout sessions, demos and developer training sessions. Another 100,000 streamed duties of the conference online.
AWS took off in its early years by providing remote servers that any start-up or developer could use to dispatch a website or project. As companies became more dependent on AWS’ core computing and storage offerings, Amazon started be carrying out adjacent products like databases, a content delivery network and a data warehouse service, and then began upgrading its products so they could be tolerant of in highly regulated industries like banking and health care.
Amazon now offers 140 services, which a attain maturity number of businesses use to run all of their core computing.
It’s not stopping with cloud infrastructure, either.
AWS said this week that it has exploited its own chips for artificial intelligence projects, following Google into the silicon for AI market. And Amazon said it will lief start bringing its technology into other companies’ facilities with branded hardware, stepping into the woman data center world of Cisco, Dell and Hewlett Packard Enterprise.
“A key theme that emerged as we spoke to scads users and partners of AWS is that while competition is increasing, AWS’ continuous focus on newer products, services, and depth of spotlights sets it apart,” wrote Ronald Josey, an analyst at JMP Securities, in a report on Thursday. “The announcements this week buttress this view.”
On Wednesday, Brent Thill, an analyst at Jefferies wrote in a note to clients that, “AWS Cloud energy was evident with 3+ days still left in the conference.”
Thill, who recommends buying Amazon shares, judges that based on potential 2022 revenue of $71 billion, AWS could be worth $350 billion on its own, a market value that today is favourable than all but eight U.S. companies, including Amazon. Salesforce currently has a market capitalization of $107 billion after a 40 percent call this year.
Investors shouldn’t be looking to a potential AWS spinoff, however. The $2.1 billion of operating profit the component generated in the latest quarter accounted for 56 percent of Amazon’s total operating earnings, providing significant readies for CEO Jeff Bezos to pour into other lower-margin areas.
AWS CEO Andy Jassy told CNBC’s Jon Fortt this week, “I’ll conditions say never about anything,” but “we don’t have any plans on the horizon” to leave Amazon.
“Usually companies will spin off brings if they just for some reason don’t want them on their books or if that new unit needs access to choice that it can’t get by being part of the broader company,” Jassy said. “Amazon has been so just incredibly generous in the matter of funding AWS so aggressively over the 15 years we’ve been working on this that there’s really been no miss for additional capital.”
Even if Salesforce isn’t as big as AWS or growing as quickly, the company is still on a tear and rewarding investors handsomely.
On Wednesday, Salesforce reported 26 percent progress for the quarter, topping analysts’ estimates for sales and profit. Just as AWS is winning business from companies that are make their infrastructure to the cloud, Salesforce’s momentum is coming from companies turning to the cloud and mobile devices for petitions used by salespeople, marketers and service departments.
Salesforce itself is a big AWS customer, committing in 2016 to spending $400 million finished four years on Amazon’s cloud platform. In September the two companies expanded their partnership to make it easier for people to use more Salesforce applications on AWS.
“We have a fantastic partnership with AWS,” a Salesforce spokesperson said in an emailed statement. The colloid of Amazon’s cloud service and Salesforce’s customer relationship management software delivers “great value and benefits to our interactive customers,” the statement said.
Salesforce also partners with Google’s cloud, and Benioff said on the earnings require this week that both companies have “phenomenal cloud offerings.”
There’s plenty of headroom uneaten for AWS and Salesforce. Gartner estimates IT spending will reach $3.7 trillion in 2018, with public cloud pass only accounting for $186.4 billion of that amount.
Subscribe to CNBC on YouTube.