- 60% of Amazon’s total profit comes from its Amazon Web Services (AWS) division, despite only being responsible for 17% of the company’s revenue.
- AWS user, Netflix, is rumoured to spend upwards of $1 billion per year on AWS services.
- Over 1,000 apps and websites were impacted when AWS faced problems this week, impacting millions of users worldwide1.
AWS faced some very public issues this week that caused major disruption to many commonly used websites and applications, such as Lloyds Bank, Halifax, Snapchat and Duolingo. The disruption was almost entirely fixed within 24 hours, but it highlights how much we rely on systems like AWS which have quietly become ubiquitous and crucial to our daily lives.
This week we will shed some light on what AWS is, how it is used and how catastrophic failures occur when things go wrong.
An overview of AWS
AWS is owned and operated by Amazon; the company best known for online shopping. In 2024 Amazon generated an astonishing $638 billion in revenue, of which $108 billion was attributed to AWS – around 17%. However, drilling down, Amazon generated profits of $68 billion, of which $40 billion came from AWS – roughly 60% of total profit2. AWS is a relatively high profit margin business for Amazon compared to the core shopping business. To put that number in perspective, $40 billion of operating income for 2024 outstrips the combined profit of UK energy majors BP and Shell3.
Figure 1: Amazon’s sprawling business empire. Source: Amazon.com Inc.
At its core, rather than forcing companies to buy and maintain their own hardware, AWS lets them rent computing resources such as storage and servers over the internet instead, i.e. the cloud. Computer resource can be adjusted efficiently meaning costs can be easily scaled with required usage. Compared to owning and operating private computing equipment, it removes the need for expensive upgrade programmes, depreciation, maintenance, in-house IT and so on.
AWS is currently the largest cloud provider globally, with Microsoft in second place and Google in third. Another household name, Netflix, uses AWS to ensure its streaming service works smoothly for millions of people around the world. AWS stores Netflix’s enormous content library and enables customers to access content with minimal buffering. AWS also maintains customer access to popular videos during traffic spikes by enabling Netflix to instantly buy additional short-term computing capacity to cope with a big spike in demand. This functionality comes at a cost with Netflix spending a rumoured $1 billion per year with AWS4.
What happened on 20th October?
The AWS outage in October 2025 was caused by a technical update error to an Application Programming Interface (API) – a connection between various computers and computer programs. This led to a failure in the Domain Name System (DNS)— DNS acts like the internet’s phonebook translating human-friendly website names (like amazon.com) into IP addresses that computers use to locate each other. This DNS failure meant that many services couldn’t find the correct server addresses, causing widespread disruptions across AWS services.
Counterintuitively, Amazon’s share price did not fall on 20th October, in fact it rose immediately after the event. Perhaps rather than illustrating the fragility of the system and encouraging customers to diversify their cloud providers, it has reminded investors how valuable and indispensable AWS is and strengthened the investment case.
Figure 2: Amazon share price from 16th October to 22nd October.
Source: AlphaTerminal
Bowmore portfolios
Aside from the core AWS business, Amazon has announced plans to invest $100 billion on capital spending in 2025 mainly related to AI infrastructure5.
As we have discussed before, the current rate of spending and investment into AI infrastructure makes us cautious around a potential supply glut and so our exposure to the ‘hyperscalers’ such as Amazon is deliberately low compared to peers.
An under-loved area of the market we have invested in is US smaller companies. This avoids the exuberance of the mega-sized tech stocks and invests where valuations are more tied to reality. As interest rates continue to come down and with the economy in the US remaining strong this creates a strong tailwind for smaller companies. Our fund in this space is the De Lisle America fund; it targets smaller companies which have fundamentally low valuations but positive momentum in terms of earnings growth and balance sheet strength.
Over the last five years the portfolio has delivered a 16.7% annualised return, whilst maintaining a relatively low correlation to the S&P500 of 0.58.
Source: AlphaTerminal, data as at 24/10/2025
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
Sources:
1. Amazon services ‘recovering’ as Snapchat and banks among sites hit by outage – BBC News
2. Amazon
3. AlphaTerminal
4. Does Netflix Use AWS? Utilising AWS for Streaming Success
5. Amazon expects to spend $100 billion on capital expenditures in 2025