Amazon's Growth Helping Rackable

The growth of Amazon's utility infrastructure business is boosting results at Rackable (RACK), which supplies data center equipment for the giant retailer, according to a securities analyst. Thomas Curlin of RBC Capital Markets said yesterday that Rackable's rate of orders is improving. "Our checks suggest the flow of orders at Rackable is improving as Amazon laps tough year-over-year comparables and other key customer relationships remain stable," Curlin wrote, adding that his third quarter revenue estimate for Rackable of $90 million "may prove conservative." Investors liked the news, as Rackable shares closed Thursday at $13.60, up from $12.07 at Tuesday's close for a two-day gain of 12.6 percent.

Rackable's revenues are driven by its large customers, with Microsoft and Yahoo accounting for nearly 60% of revenue. Executives at Amazon (AMZN) have described the growth of the company's infrastructure business in only vague terms in their analyst calls, emphasizing that its new line of business (which includes the S3 and EC2 services) is in the early stages of a much bigger long-term game. But the Rackable news confirms that the growth of these new services is prompting some serious infrastructure investments for Amazon.