×

Snap's cloud bill this year will be higher than its total revenue for 2016


Evan Spiegel and Bobby Murphy, founders of Snapchat.
J. Emilio Flores | Corbis | Getty Images
Evan Spiegel and Bobby Murphy, founders of Snapchat.

If you want to see why Snap's costs are so high, look to the clouds.

Snap said in an updated IPO filing on Thursday that, on top of its previously disclosed deal to spend $400 million a year on Google's cloud services, the company is spending $1 billion over the next five years with Amazon Web Services.

Snap broke out the spending per year with AWS, revealing that in 2017 it will spend $50 million on AWS, with the amount rising over time.

Still, that means Snap's cloud hosting costs this year will total $450 million, or about $45 million more than the company generated in revenue in all of 2016.

The AWS deal is "for redundant infrastructure support of our business operations," Snap said. In other words, the company can't be entirely dependent on Google to quickly deliver videos and photos while also handling data storage.

Cloud services have been instrumental in enabling young companies like Snap to get off the ground and grow rapidly without needing to bulk up on expensive servers, storage arrays and networking gear. But renting all that equipment gets costly for 158 million daily active users.

So Snap also dropped this line in its update:

"In the future, we may invest in building our own infrastructure to better serve our customers."