Back in 2017, as Pinterest’s spending with Amazon Web Services skyrocketed thanks to user growth, the company cut a deal with AWS that traded pricing concessions with a commitment to spend $750 million with the cloud market share leader by 2023, a new filing reveals.
Pinterest had $441.1 million left to go on that commitment as of the end of 2018, and it expects to honor it, the company revealed with the release of its S-1 statement Friday. The company recorded $273 million in revenue during the fourth quarter of 2018, during which it eked out net income of $47 million.
Pinterest was born on AWS, and is one of the more prominent examples of how social media and web startups founded in the wake of the Great Recession used cloud services to get off the ground and grow into large businesses without the up-front investment required to build their own tech infrastructure. But costs were rising quickly when the agreement was altered in 2017: Pinterest’s cost of revenue was $51.5 million in the first quarter of 2017, and after the agreement was reached that cost of revenue fell to $36 million the following quarter, as traffic continued to increase.
Later that year, Pinterest estimated it had saved $42.5 million in cash in 2017 thanks to the deal. “Prior to the amendment, we primarily purchased hosting services pursuant to one-year prepayment arrangements. Under the amended agreement, the term of our existing prepayments was extended, and we no longer prepay for hosting services,” it wrote.
Those price concessions came with a cost of their own, of course. In addition to the $750 million in spending guarantees, Pinterest will not be getting on the multicloud train in any major fashion for a few years, and it has also essentially agreed that it can’t be acquired by AWS rivals Microsoft and Google, according to the S-1 statement:
Under the agreement with AWS, as amended by an addendum entered into in May 2017, in return for negotiated concessions, we currently are required to maintain a substantial majority of our monthly usage of certain compute, storage, data transfer and other services on AWS. This addendum is terminable only under certain conditions, including by either party following the other party’s material breach, which may be the result of circumstances that are beyond our control. … A material breach of this addendum by us, or early termination of the addendum as a result of an acquisition of us by another cloud services provider, could carry substantial penalties, including liquidated damages.
Pinterest is expected to list its shares on the New York Stock Exchange under the symbol “PINS” (what else) in April.