[JonathanBeuys]

Do I understand your logic correctly that after 14 years of 30% growth another year is extremely unlikely and after 14.99 years it is almost impossible?

My logic is that we only have to take the next 10 years into account when calculating the probability.

And lots of things grew 30% or more for 10 years.

Bitcoin's market cap grew over 70% pa for 10 over years now.

Amazon's revenue grew over 60% pa for over 10 years in their early days.

I can think of many numbers, but would have to check: global solar installations, smartphone usage are examples that come to mind.

[oskarkk]

My logic is that past results don't indicate future results, and assuming that the growth rate from the last 5 years will stay the same for the next 10 years is a big "if". For new companies, new products, high growth rates over many years are normal, but we're talking about an established market that has already seen big growth rates over a long time (as the other commenter pointed out). Smartphone sales today are the same as in 2015, because there's an obvious ceiling to growth in that market, and it has been reached a long time ago. Number/power of solar installations is also a very different thing than revenue, because the growth in that market is caused by the rapidly falling prices (~10x in the last 15 years), so the installed power grows much faster than the cumulative cost of that power. As the computing power is still getting cheaper, and cloud usage is already high, with many competitors, I'd expect the revenue growth to slow down in the next 10 years.

[JonathanBeuys]

Is cloud usage really high?

Look at all the stuff people do. Almost none of it is automated via software. Look at people on construcion sites, cashiers, cleaning stuff, cab drivers ... all of it is done manually. I am writing this manually, even though I would prefer to just say it while doing the dishes. But there is no good voice interface for browsers yet. And hey, why do I even do the dishes?

I would say we haven't even started automating the world via software.

10 years of 30% growth just means we will spend 14x more on software in 10 years than we do now. Considering we have not even really started using software for automating work, I would be surprised if we stay below that.

[oskarkk]

You may be right, especially with the growth of applications of software. Personally I'd rather bet on slower revenue growth than the current 30%. Not necessarily much slower, but even 25% yearly growth over 10 years would be a big difference in the end compared to 30%. My thinking is that usage of cloud compute can grow greatly, but with revenues growth lagging behind, because of falling costs of compute (more powerful/efficient CPUs etc), economies of scale, and competition putting pressure on prices. For example AWS operating margin is 34% currently, I expect that to fall as the market matures (but Google's cloud margins are much lower right now).

[JonathanBeuys]

Ok, let's say 25% growth over 10 years. That is a factor of 9.

9*$50B = $450B yearly revenue.

What could be the margin Alphabet makes from that? Last quarter, Alphabet had $100B revenue and $35B net income. So 35% margin.

$450Bx0.35 = $158B

What is $158B in annual profit worth? Currently Alphabet's p/e is about 30. If we take that, it would be $158Bx30 = $4740B. So around $5T.

If we are heading towards the creation of $5T in value via cloud revenue, investing $100B per year to build it seems not particularly high to me.