Last week, Amazon.com posted a $544 million operating loss for its third quarter ending Sept. 30. Although CEO Jeff Bezos has long shown a willingness to sacrifice profit for growth, how long will shareholders back that strategy? Not long, it appears: The next day, investors divested, dropping Amazon.com's share price by 8.3 percent.
These financial questions bear directly on the future of Amazon Web Services, the highly popular cloud platform. Can Amazon continue to invest more resources into AWS at the expense of overall profits? Can it afford not to, with both Microsoft and Google and biting at its heels?
For several years, enterprise IT has favored AWS, mainly because it was early on the scene and had momentum. Technology considerations were secondary, though important. Now that strong alternatives are available, should IT continue to favor AWS?
Here's a way to gut-check your decision: If Amazon.com spun out AWS as a separate, public company, would you buy its stock? I would.
The traditional Amazon.com business is retail, but Amazon is getting its greater value growth from AWS. Thus, Amazon and its investors would be crazy not to keep investing in AWS.
The stock market is notoriously short-sighted and fickle, so the disappointment that Amazon.com remains in investment mode shouldn't blind you to the long-term value of AWS -- as a user, not only an investor. Having faith in AWS is a no-brainer.