In the past few weeks, a string of companies owned by Amazon have filed accounts in Ireland. As they closed their books for 2019, they reported that they were “dependent on the continued success of the group companies”.

Little did they know about the success to come. As the Covid-19 pandemic drove the world online for human activities ranging from shopping to work meetings and table quizzes, the US-based e-commerce and cloud computing giant has seen its share price jump by 30 per cent on the Nasdaq market since the start of this year.

Quarterly results to the end of March show Amazon’s revenue soared to $75 billion, up from $60 billion in the first quarter of last year. Of course, Covid-19 created problems for the company, with increased costs and warehouse closures in some large markets such as France. 

Profitability fell, with net income down by as much as sales grew. Yet investors don’t care: the market share Amazon has been acquiring will be there in the future to line their pockets – starting with those of company founder, president and CEO Jeff Bezos. As for Ireland, the subsidiaries based here operate the very slice of Amazon’s business that is enjoying exponential growth without facing social distancing problems on busy warehouse floors: data centres.

Amazon structure
Click on the map to enlarge.

While most US-based tech multinationals attract attention to their Irish operations because they base their non-American intellectual property, sales and associated profits here, this is not the case for Amazon. Its core business for Europe is located in Luxembourg, and it does not even have an website, forcing Irish online shoppers to use its UK outlet – though there have been rumours that this will change with Brexit.

Amazon first established a serious presence in Ireland in 2006 when it opened its customer service centre at Cork’s Airport Business Park. The company operating it, Amazon Ireland Support Services Ltd, charges other group companies for technical and commercial support without returning a profit. Its turnover grew from under €120 million in 2018 to €152 million last year, and it added 100 employees to reach a total of 1,131 in 2019. Their average gross salary was €37,150, topped up with an €805 pension contribution and a €1,766 share-based payment.

The real money here is in AWS infrastructure

While Amazon continues to invest in the Cork customer service centre, however, the real money here in recent years has been in data infrastructure. Through its brand Amazon Web Services (AWS), it controls nearly half of the global market for cloud services, according to analysts at Gartner. Its servers host anything from consumer websites and apps to internal corporate IT systems and government online services, competing with Microsoft, Google and IBM.

Amazon’s worldwide quest for data centre locations with cool climates, good connectivity and access to renewable energy sources is increasingly leading it to Dublin. Its dedicated subsidiary Amazon Data Services Ireland Ltd added €525 million worth of fixed assets to its balance sheet last year, with buildings and equipment at server farms dotted around the city’s suburbs assuming a net book value of €2.9 billion on December 31 – and growing. Its tangible assets are evenly split in value between owned property and infrastructure, and leases – some from the IDA.

According to the specialist database Baxtel, Amazon has nine data centres operating or under construction in Dublin, clustered in three areas: Blanchardstown/Mulhuddart, Tallaght/Citywest and the Clonshaugh Industrial Estate off the airport road. It continues to develop projects at pace, including the recent redevelopment of the former GE Superabrasives factory along the M1 motorway in Clonshaugh, an extension of its Tallaght campus onto the site of a former Jacob’s factory on the Belgard Rd, or the first of eight greenfield data halls under construction on 26ha of IDA land in Mulhuddart after winning a planning appeal before An Bord Pleánala in 2018.

Amazon Mulhuddart
Planning design for Amazon’s new data centre under construction in Mulhuddart, Dublin.

All investment is financed through cash and leases, with hardly any borrowings: the infrastructure company owed only €80 million on an inter-company loan at the end of last year.

Amazon Data Services Ireland’s directors report that “the key performance indicator of the company is administrative expenses”. These grew by half from €1.6 billion in 2018 to €2.4 billion last year as more data centres came on stream and demand for their services increased. Nearly €1 billion of that expense was on depreciation of tangible and lease assets.

Another €195 million was spent on staff costs, with 1,728 people employed at Amazon Data Services Ireland on 31 December. Their average salary was just under €90,000, plus a €2,164 pension contribution and nearly €20,000 in share-based payments.

The company doesn’t market cloud services to customers, instead charging other group companies for use of its data centres. It had €2.5 billion in revenue last year, leaving a net profit of €40 million on which it paid €11.7 million in corporation tax.

Cloud sales out of Luxembourg

Amazon does have a cloud computing commercial subsidiary in Ireland, Amazon Web Services Ireland Ltd, but its activity stopped in July 2018 and it was sold to Luxembourg-based Amazon Web Services EMEA SARL, which had registered a branch in Ireland the previous year in preparation for the move. The Luxembourg company also absorbed AWS’s UK unit that year and has branches in all its major European, Middle Eastern and African markets, centralising all cloud sales for these regions.

Last year, Amazon Web Services EMEA SARL’s revenue more than doubled to €4.8 billion, or just under 14 per cent of AWS’s global turnover. Its main expenditure was a €2.6 billion charge for operational costs “including provision of services from affiliated undertakings”.

While this is a close match for the amount charged by Amazon Data Services Ireland for the use of its data centres, these are not necessarily the same payments. Amazon has based data centres throughout the EMEA region, not only in Ireland – and they all charge AWS for use of their infrastructure. Meanwhile, Amazon Data Services Ireland may charge group companies in other regions, such as America or Asia, for its services. These flows do not appear in published accounts.

Office space and wind farms

Another missing figure is Amazon’s electricity bill for its ever-expanding power-hungry data centres in Ireland. One indication, however, is emerging through the accounts of Amazon Energy Eoraip Ltd, a dedicated electricity trading subsidiary established in 2017 at the group’s Dublin office in Burlington Plaza. (According to Bloomberg, Amazon is now in talks to expand and take Bank of Ireland’s office in the building next door.)

Amazon Energy Eoraip started trading last year, when it hired its first two staff. According to LinkedIn postings, the company continued to recruit in the renewable energy procurement area in recent weeks and Amazon poached a specialist in power supply to data centres from the utility Eirgrid.

Amazon Energy Eoraip had €664,831 in revenue from other group companies in 2019 and made a €40,016 loss. Amazon has two existing power purchase agreements with wind farm operators in Co Donegal and Co Cork totalling over 100MW of installed capacity. Its needs, however, are much larger than this, and one of Amazon Energy Eoraip’s first tasks after being formed was to obtain a generator’s licence from the Commission for the Regulation of Utilities to operate a temporary 21MW gas-fired power plant at one of the group’s Dublin data centres, where grid power was insufficient. Hardly a long-term plan – we can expect more from the company on Ireland’s renewable energy market.