Apple will reportedly give Amazon about $1 billion this year to house its various cloud features in Amazon Web Services, making up about 9 percent of projected AWS revenue for the year. But Morgan Stanley analyst Brian Nowak warns that the relationship may be coming to an end.
According to Nowak, Apple is working to build “2.5 million square feet of data centers to power iCloud storage, iTunes, App Store and other services” before 2018. That’s about 40 percent of the space that Amazon used last year for the entire AWS system.
Morgan Stanley speculating on Apple dumping AWS. pic.twitter.com/iFGJDvPeCZ
— Jay Yarow ?? (@jyarow) February 1, 2016
Apple said on its earnings call last week that data center spending would be going up this year by around 30 percent. While planned data centers in Arizona, Ireland and Denmark will make up some of that cost, so too will more people using Apple’s cloud services.
Not only does Apple expect people to be storing more on iCloud drive, but the company hopes to have more people using Apple Music, downloading apps from the App Store and querying Siri, which all hit Apple’s data centers.
That gives Apple a strong incentive to move away from third-party cloud providers. The company has been building data centers around the world, so it has likely been thinking about moving away from Amazon for a while.
While Nowak pointed to this potential move as a hit to Amazon, the ecommerce giant can likely pick up the slack pretty quickly. Last quarter, AWS sales were up 69 percent year over year and generated $2.4 billion in one quarter alone.
With clients like Netflix and Airbnb expanding rapidly, AWS won’t have to wait long to fill Apple’s place if it does leave. Amazon is also adding services for emerging markets, like its Internet of Things integration. Netflix in particular is always adding content and with availability in almost every country on Earth, its user base will likely continue to grow as well.