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Amazon stops using EU tax shelter; AWS tops Gartner's IaaS rankings

May 25, 2015 4:08 PM ETAmazon.com, Inc. (AMZN) StockAMZN, MSFTBy: Eric Jhonsa, SA News Editor11 Comments
  • Bowing to regulatory pressure, Amazon (NASDAQ:AMZN) has begun booking European revenue in the countries in which sales were recorded, rather than funneling it through the low-tax haven of Luxembourg. The change, which could have a big long-term effect on Amazon's EU income tax payments, went into effect on May 1, and has thus far covered U.K., German, Italian, and Spanish sales.
  • Amazon already collects VAT on European sales, but its use of Luxembourg is one reason why its European income tax payments have been modest - the company paid just £4.2M in U.K. taxes in 2013 on revenue of £4.3B. The other reason, of course, is that Amazon's international ops (thanks partly to Asian investments) have been in the red - Amazon reported a $297M International segment op. loss for 2014, compared with a $2.11B North American op. profit.
  • Amazon's move could be a sign of things to come: Apple, Google, Microsoft, Starbucks, and a slew of other U.S. multinationals have also come under fire for their use of tax havens to cut their EU tax bills.
  • Separately, Gartner has given Amazon Web Services its highest rankings in its annual cloud infrastructure (IaaS) Magic Quadrant report in both the "Ability to Execute" and "Completeness of Vision" categories. Among the 15 IaaS providers reviewed, AWS and Microsoft's (NASDAQ:MSFT) Azure are the sole occupiers of Gartner's "Leaders" quadrant.
  • Gartner: "[AWS] is the overwhelming market share leader, with over 10 times more cloud IaaS compute capacity in use than the aggregate total of the other 14 providers in this Magic Quadrant. This has enabled it to attract a very large technology partner ecosystem ... it is extraordinarily innovative, exceptionally agile, and very responsive to the market. It has the richest array of IaaS features and PaaS-like capabilities ... Although it is beginning to face more competition from Microsoft and Google, it retains a multiyear competitive advantage."
  • Gartner does caution AWS "can be a complex vendor to manage," and that it's "spreading its efforts very broadly." Altogether, it expects global IaaS spend to grow 32.8% this year to nearly $16.5B, and post a 29.1% CAGR from 2014-2019.

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