[easp]

Well, putting aside the fact that you are pretty much wrong (servers are cheap, power, cooling, etc, not so much), keep in mind too that their initial pricing may not have been profitable, or may even have been at a loss because what matters is the total lifetime value of a customer.

Amazon (or any other hosting provider) may set their initial price below cost because declining costs will give them a reasonable margin when figured over the space of a few years.