Lyft’s $300 Million Deal With AWS: 5 Things You Need To Know

Lyft Goes Public With Cloud Details

Ride-hailing company Lyft Inc. this month provided an unusual window into its relationship with Amazon Web Services, detailing financial terms for its AWS cloud infrastructure services in a U.S. Securities and Exchange Commission filing.

The “born-in-the-cloud” Lyft disclosed its spending commitment to AWS for hosting the on-demand transportation company’s platform and supporting its operations in an S-1 registration statement filed this month in anticipation of its planned initial public offering next week.

Lyft is expected to price its shares March 28 and start Nasdaq trading the next day. Based on its estimated stock price of $62 per share to $68 per share, the offering could raise up to $2.4 billion.

Prior to Lyft’s SEC filing, AWS last month announced that Lyft – which facilitates more than 50 million rides per month -- was going “all-in” with the public cloud provider.

Here’s what we know about Lyft’s relationship with and dependence on the No. 1 AWS, based on its SEC filing and other information released by AWS.

A $300 Million Deal

Lyft amended its commercial agreement with AWS in January, when it committed to spending a total of 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 fail to meet the minimum purchase commitment during any year, we may be required to pay the difference, which could adversely affect our financial condition and results of operations,” Lyft disclosed in the SEC filing. “We pay AWS monthly, and we may pay more than the minimum purchase commitment to AWS based on usage.”

Lyft is the second largest ride-hailing company in the United States after Uber. It facilitated 178.4 million rides in the quarter that ended Dec. 31, so its estimated $8.3 million monthly payment to AWS would amount to about 14 cents per ride.

AWS Partner: Nothing Out Of The Ordinary

Simon Anderson, founder and CEO of Los Angeles-based AWS partner Mission, said: “I don’t see anything out of the ordinary related to Lyft’s disclosures on AWS expenditures and risks. Lyft likely has an enterprise discount agreement with AWS for three years, and AWS services are designed to be resilient and redundant.”

Hyoun Park, CEO and chief analyst at Amalgam Insights, agrees the contract is not fundamentally unexpected, but does a “good job in benchmarking what a cloud agreement should look like for a rapidly growing company.”

“That 4 (percent) to 5 percent range of dedicated cloud-based infrastructure spend is not unusual for a tech-focused company like Lyft and should be seen by the channel as a goal for building up cloud infrastructure deals,” Park said.

For Lyft, the big advantage of the contract is not having to worry about an cloud infrastructure provider over the next three years as it continues to pursue hypergrowth, according to Park.

“In general, any company growing 30 percent year-over-year does not have time to put on the brakes and build their own infrastructure or to spend significant time pulling up private cloud facilities,” he said. “Given Lyft's continued growth, this contract could end up being a $500 million-plus deal over the next three years. That $300 million mark is just bit of a safety net, but something that Lyft should quickly (go) through in the first 18 to 24 months of the deal.”

Under its previous March 2018 agreement with AWS, Lyft’s purchase commitments to the cloud provider totaled at least $150 million through June 2021, according to the filing.

Lyft’s agreement with AWS remains in effect until either party cancels it, but AWS only can terminate it “for convenience” after March 31, 2022 and must comply with advanced notice requirements.

“In the event that our agreement with AWS is terminated, or we add additional cloud infrastructure service providers, we may experience significant costs or downtime in connection with the transfer to, or the addition of, new cloud infrastructure service providers,” Lyft disclosed.

Lyft said it had $8.1 billion in ride bookings last year, $2.2 billion in revenue -- a 103 percent increase from 2017 -- and a net loss of $911.3 million.

A Risk Factor For Investors

The San Francisco-based company lists its dependence on AWS as one of its risk factors that potential investors should weigh when investing in its stock.

“We primarily rely on Amazon Web Services to deliver our offerings to users on our platform, and any disruption of or interference with our use of Amazon Web Services could adversely affect our business, financial condition and results of operations,” the company said in its SEC registration statement. “AWS’ facilities are vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct. Our platform’s continuing and uninterrupted performance is critical to our success.”

Lyft said it has experienced and expects to continue to experience interruptions, delays and outages in service and availability from time to time due to factors including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

“In addition, any changes in AWS’ service levels may adversely affect our ability to meet the requirements of users,” Lyft said in its filing. “It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as we expand, and the usage of our offerings increases.”

Lyft’s Technology Infrastructure And Operations

Lyft has been an AWS customer since its 2012 launch, and its offerings are built on a scalable technology platform that enables it to manage peaks in demand, according to the SEC filing.

“We designed our platform with multiple layers of redundancy to guard against data loss and deliver high availability,” the company’s S-1 filing states. “Incremental backups are performed hourly or more frequently, and full backups are performed daily. In addition, as a default, redundant copies of content are stored independently in at least two separate geographic regions and replicated reliably within each region.”

Lyft Went All-In

Last month, AWS said Lyft was going “all-in” with AWS to enhance its ridesharing services, grow its bike and scooter business, and enable its autonomous vehicle technology initiatives. Lyft is using AWS services including database, serverless, machine learning and analytics in addition to Amazon DynamoDB -- a serverless database that automatically scales and continuously backs up data -- to support mission-critical workloads, including its ride-tracking system that allows Lyft to provide more precise vehicle routing.

“By leveraging Amazon DynamoDB, Amazon Elastic Container Service for Kubernetes (Amazon EKS) and AWS Lambda, Lyft migrated to a microservices architecture to create more than 150 microservices that independently scale workloads while reducing complexity in the cloud to enhance every element of the rider experience,” Amazon said in its announcement.

Lyft has a data lake on Amazon Simple Storage Service (Amazon S3) and uses Amazon Redshift to analyze the data it’s storing in the cloud to uncover riding patterns and predict rider pick-up and drop-off locations. Lyft also is looking to leverage machine learning services such as Amazon SageMaker to help provide building its self-driving system for ridesharing.