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Pinterest Reveals Six-Year, $750M AWS Cloud Deal In IPO Filing

‘Even more surprising here, is that Pinterest is spending somewhere upwards of 20 percent of its total revenue on cloud,’ Amalgam Insights founder and CEO Hyoun Park says. ‘Even for a tech-centric company, that is a lot to spend on technology.’

Pinterest has a six-year commitment with Amazon Web Services that requires the image-sharing social media company to spend at least $750 million on cloud infrastructure services from AWS, according to a regulatory filing by the company today.

Pinterest’s agreement with AWS, amended in May 2017, requires it to purchase at least $750 million in AWS cloud services – primarily compute, storage and data transfer services -- through July 2023, according to Pinterest’s S-1 registration statement filed with the U.S. Securities and Exchange Commission in advance of it planned initial public offering.

The San Francisco-based Pinterest said it was required to make an initial purchase at least $125 million from AWS by June 2018. Its remaining contractual commitment stood at $441.1 million as of Dec. 31, 2018, according to the filing.

Spending more than $100 million a year for cloud is significant by any standard, said Hyoun Park, CEO and chief analyst at Amalgam Insights.

“But even more surprising here, is that Pinterest is spending somewhere upwards of 20 percent of its total revenue on cloud,” Park said. “Even for a tech-centric company, that is a lot to spend on technology. And this also provides a sense of how much cloud computing is actually necessary to build a ‘unicorn’ startup, a multibillion-dollar tech company that is a market leader.”

AWS provides the cloud computing infrastructure that Pinterest uses to host its website, mobile application and many internal tools that it uses to operate its business, the filing states. Under its AWS agreement, it’s required to maintain a “substantial majority of our monthly usage of certain compute, storage, data transfer and other services on AWS.”

Pinterest’s app and website allows “pinners” to save images and links to digital boards.

The company generated $755.9 million in revenue for the year that ended Dec. 31, 2018 – up 60 percent from $472.9 million in 2017, according to the SEC filing. It posted a net loss of $63 million, compared to a $130 million net loss in 2017.

Its regulatory filing follows one submitted earlier this month by ride-hailing company Lyft, which divulged it committed to spending at least $300 million on AWS services this year through December 2021, with a minimum amount of $80 million in each of the three years.

“If we were talking about this in sports contract terms, we would say Pinterest signed a six-year, $750 million contract, while Lyft ‘only’ signed a three-year, $300 million contract, where (AWS) represented closer to 5 percent of Lyft's annual revenues,” Park said.

Pinterest expects to meet its remaining AWS spending commitment, according to its filing.

If it fails to do so, however, Pinterest noted it would be required to pay the difference, except in limited circumstances -- such as termination due to its acquisition by another cloud services provider, which would result in an obligation to pay liquidated damages.

“The addendum restricts our ability to terminate the agreement until the minimum spend commitment is satisfied,” the filing states.

Pinterest’s systems and operations are vulnerable to damage, delays or interruptions from fire, flood, power loss, telecommunications failure, spikes in usage volume, terrorist attacks, acts of war, earthquakes and similar events, its filing stated.

“We are particularly vulnerable to these types of events because our cloud computing infrastructure is currently located in one geographic region,” the company said.

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