Apple spends over $ 30 million per month on Amazon's cloud service
Apple is a company with huge cloud needs
Apple's spending on cloud platform reflects the company's determination to provide online services like iCloud quickly and reliably, even if it hugely depends on the opponent.
When Apple's leading product, iPhone, reached the saturation point of the market, the company began to turn more towards online services in the hope of turning this business into a major source of revenue. Recently, Apple stopped revealing sales of iPhones and other hardware products. Instead, it began to reveal the profits of some service businesses, including iOS App Store, AppleCare, Apple Pay and iCloud. Apple also introduced a new subscription service for videos and magazines last month.
People use more than 1 billion Apple devices every month and therefore, Apple has significant storage and computing needs. The company is investing heavily to build its own infrastructure. In January 2018, Apple announced plan to spend $ 10 billion on data centers in the United States for five years. In December 2018, Apple said it would spend $ 4.5 billion in this amount until 2019.
Besides relying on smaller third-party cloud vendors, Apple also works with major tech giants, including Amazon Web Services (AWS) and Google Cloud Platform. Microsoft's Azure has also provided cloud tools for Apple in the past.
The company says that it uses AWS to store iCloud, but does not disclose if there are any other Apple services using AWS or a cloud service of any other third parties.
Apple will still use Amazon Web Services more and more in the future
At the end of March, Apple's average spending for AWS was $ 30 million per month (in the first quarter of 2019). This number was 10% higher than the same period last year. If Apple's AWS usage remains at that level for the rest of 2019, its annual spending on this service will surpass $ 360 million. Apple spent about $ 350 million in 2018 for AWS.
Such expense may continue in the near future. Over the past few months, Apple has signed an agreement that includes a commitment to spend at least $ 1.5 billion in five years for AWS. In the most recent fiscal year, Apple's operating cost was $ 30.94 billion.
AWS is a major part of Amazon's business. In 2018, AWS gained $ 25.66 billion in revenue, equivalent to 11% of Amazon's annual revenue, and nearly 59% of Amazon's operating income.
Although Apple is one of AWS's top customers, its payments account for a very small portion of Amazon's total revenue. But with this level of spending, AWS will get more revenue from Apple than some other companies, including Adobe, Capital One, Intuit, Snap, Lyft and Pinterest.
Accordingly, Lyft agreed to pay AWS at least $ 300 million for cloud services by the end of 2021, while Pinterest said it had committed to spending at least $ 750 million for AWS during the six-year period that would end by the middle of 2023. That means Lyft and Pinterest spend an average of $ 100 million and $ 125 million respectively each year for AWS. Snap pledged to spend $ 1.1 billion for AWS by the end of 2022, at least $ 150 million in 2019.
Amazon is getting more and more revenue from the amount of customers committed to using the service in the future, mainly associated with AWS. According to Amazon, by the end of 2018, both side had a $ 19.3 billion agreement for contracts with original terms lasting more than a year.
However, both Apple and Amazon declined to comment on the issue.
By: Brian Miller