Amazon will keep on raising its cloud spending

Written on:July 26, 2012
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Amazon didn’t wow the street with its second quarter earnings news but the company will definitely keep investing in its cloud infrastructure. For its upcoming third quarter, it plans to spend a healthy $ 800 million to $ 900 million in capex money on technology, Amazon CFO Tom Szkutak told analysts on the company’s earnings call.

That’s up considerably from the $ 657 million Amazon devoted to buying fixed assets “including internal-use software and website development” technology for the just-closed second quarter. The comparable figure for its first quarter was $ 433 million.

The company does not —  it probably cannot — break out how much of that tech spending flows into the Amazon Web Services computer infrastructure it rents out to customers vs. the IT it uses to run its gargantuan retail business.

One thing is clear, while Amazon is the market-leading cloud service provider, other companies with deep pockets — Microsoft, Rackspace, Google, Hewlett-Packard among them — are willing compete with Amazon in this space.

(That’s a race that some onlookers deem irrational. They say these companies are spending multiple billions of dollars to crack what is probably teh lowest-margin business in technology. But there you have it.) That’s one reason the company must keep spending. And as it adds more and more value-added services atop its infrastructure, along with support services to help customer run it, its costs will likely continue to rise.

Photo courtesy of Flickr user Will Merydith


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