Remember the good old days when investors used to gossip about when Amazon.com, Inc. (NASDAQ:AMZN) might actually turn a profit, while those same investors plowed money into AMZN stock anyway? Those days are long gone, with Amazon posting consistent profits these days.
And despite the fact that most of us know Amazon as an ecommerce play first (two-day delivery, anyone?) and perhaps a content play second (Jeff Bezos at the Golden Globes, anyone?), the company’s cloud business has arguably played that largest role in the stock’s shift into profitability.
Amazon and AWS Strength
That’s precisely why Amazon’s latest news bit is such a big deal. The company just quietly acquired harvest.ai, a cybersecurity firm that it plans to use with AWS.
While the deal has been kept pretty hush-hush (Amazon has declined several sites’ request for a comment), there are several potential applications, including the company bolstering its security-as-a-service chops and monetizing a highly lucrative AI market.
Harvest.ai was founded by a team that counts two former NSA employees on its roster.
In a nutshell, harvest.ai applies machine learning and AI to monitor potential attacks on customer data — a valuable technology for AWS clients. As Geekwire summarized, “It tracks where critical data resides and who has access to it, then helps search for changes in behavior of users, key business systems and applications caused by targeted cyber attacks.”
This security could be applied to Amazon’s popular Alexa product, which recently stole the show at CES but has also come under a fair share of scrutiny because of security concerns.
Security Vital for AMZN Stock
On top of that, in an age where 1) security seems shaky as ever and 2) customer data is more important than ever, security-as-a-service could be a nice boon to AMZN stock’s foothold in the cloud market. And once again, that could be a big deal for Amazon’s bottom line. In the most recent earnings report (for the most recent nine months), Amazon Web Services has brought in 40% more operating income than North American retail sales despite bringing in one-sixth of the revenue.
As TechCrunch put it, AWS is “on its way to being a business that generates more than $10 billion on a regular basis” (trailing twelve month) — scale without the infrastructure costs of the core AMZN retail business.
This security could also be applied to Amazon’s popular Alexa product, which recently stole the show at CES but has also come under a fair share of scrutiny because of security concerns.
When you see insane growth rates on tap for Amazon (60% next quarter, 280% this year, 86% next year, for an average of 36% over the next five years), you can bet AWS deserves a solid chunk of the credit.
And while it’s admittedly difficult to quantify the specific impact of an acquisition like harvest.ai, the move itself — suspected to be worth $19 million — suggests a smart focus for the tech giant. That focus should reassure AMZN stock investors, if they even needed it.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
