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Apple’s future is increasingly getting dependent on Amazon; here’s why

FE Online
Apple, iPhone maker, Apple Inc, Morgan Stanley, market news

Even while the world’s two technology giants Apple and Amazon continue to spend billions of dollars for customers’ attention and money, the former is also highly dependent on Amazon as it spends over a whopping $30 million per month on Amazon’s cloud offering – Amazon Web Services (AWS), CNBC reported citing people familiar with the development. This is critical for Apple to offer its cloud-based offerings such as Apple Music, cloud storage service iCloud, and video streaming service Apple TV+ and grow beyond its smartphones.

The spending also comes in the backdrop of its significant computing and storage needs as more than 1 billion Apple devices are used every month by people.

Importantly, Apple had recently ceased making public unit sales for iPhones and other hardware offerings and instead began with disclosures of profit margin for its software products such as App Store, iCloud etc.

The spending by Apple was on its way at the end of March 2019 end to average over $30 million per month in the first quarter of 2019. Nonetheless, Apple too has been spending monumental amount to support its storage requirements.

For instance, in January last year the company had announced plans to invest $10 billion in five years on data centers in the US, out of which $4,5 billion it said, last December, would be used in the current year, CNBC said.

However, if the spending remains at over $30 million-monthly mark, then its annual AWS spending would grow beyond $360 million, up from around $350 million last year.

This $360 million revenue contribution by Apple to AWS will be bigger than what ride-hailing company Lyft, social media company Pinterest and multimedia messaging app Snapchat. Lyft and Pinterest average annual spend on AWS is $100 million and $125 million per year while Snapchat would be spending at least $150 million in 2019 as per their commitments to pay to AWS by end of 2021, mid-2023 and end of 2022 respectively.

AWS, which remains a major revenue driver for the world’s largest online retailer — Amazon churned $25.66 million, that is, 11 per cent of its overall annual revenue last year.