Amazon AWS controls 29% of a cloud infrastructure services market that is growing nearly 50% annually, a market that reached almost $6 billion in second-quarter revenue according to Synergy Research. Amazon AWS sells services that replace business operations, and with over one million customers, AWS’s reach is far.
With that said, data analytics and cloud services go hand-in-hand, and because of AWS’s presence, the three big data pure plays could have some trouble ahead.
DATA Stock Has the Most to Lose
DATA is the fastest-growing of the data analytics companies, with expected revenue growth of 53% this year and 36% next year. DATA stock grew 65% year over year during its last quarter and produced $527 million in revenue over the past four quarters. As far as last quarter’s revenues, $96.7 million was licensing revenue, which later becomes recurring revenue.
Tableau has essentially taken the market by storm, but it has also gained by AWS not being a competitor. DATA works with AWS customers by allowing its platform to interact with Amazon AWS, and its core Tableau Server Product is also available on AWS.
If Amazon gets serious about data analytics, DATA could lose those connections to AWS, and in turn see a deceleration of growth. If so, DATA stock would likely suffer.
SPLK Stock’s Fate Is Still Undetermined
While DATA’s platform collects information from industries, markets and people, Splunk’s data is derived from machines. SPLK collects data from smartphones, servers, computers, etc. — and that’s a space where there are no connections named to AWS’s Space Needle.
That said, SPLK is an enterprise data service provider, and AWS is targeting enterprise customers. In fact, FBR & Co.’s Daniel Ives recently said that only 10% of the enterprise business intelligence market is penetrated, making it a great opportunity for AWS. If that’s AWS’s targeted industry, and machines are included, SPLK stock could feel the pain.
Like DATA, SPLK is expected to grow fast: 40% this year and 32% next year.
QLIK Stock Could Be Shut Down Fast
QLIK stock has held up quite well in a market that has been unforgiving to top BI analytic stocks. That’s because it recently launched Qlik Sense, a visualization product that competes directly with DATA. Many investors think that it will become a legitimate threat to DATA and accelerate QLIK’s otherwise mediocre growth.
However, Qlik Sense is getting off to a slow start. During QLIK stock’s last quarter, its license revenue increased just $9 million year-over-year. That’s a lot less than the $35 million-plus in license revenue growth that DATA created.
Based on this information alone, don’t be surprised if Qlik Sense is the first service shut down when AMZN gets rolling.
It Gets Worse
The bottom line is that AMZN presents a new risk that pure BI analytic service providers have not had to face during their existence. The big question is how they will respond.
But unfortunately, it does not end there for DATA, SPLK and QLIK, as Microsoft (MSFT) is also making a big push into the BI space with major upgrades to its Power BI platform. This means that two companies that, together, own 40% of the cloud infrastructure services space — combined with an unrivaled presence as enterprise service providers — will be competing for customers with the likes of DATA, QLIK and SPLK.
In essence, maybe one of these three companies can survive, maybe one or two get acquired, but regardless, all face new challenges, and those new challenges likely mean lower stock prices.
As of this writing, Brian Nichols owned shares of DATA.