- General
- June 22, 2019
- 6 minutes read
Slack Has A $250 Million Five-Year AWS Contract
Slack co-founder and CTO Cal Henderson Photo by Noam Galai/Getty Images for TechCrunch Slack just went public via a direct…
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| Slack co-founder and CTO Cal Henderson
Photo by Noam Galai/Getty Images for TechCrunch
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Slack just went public via a direct listing that reaped big returns for VCs that backed the company when it traded in private hands. The company’s valuation eclipsed $20 billion on its first day of trading, nearly tripling its pre-IPO $7.1 billion valuation. As is always the case, Slack filed with the SEC before going public. We previously touched on several key takes from Slack’s SEC filing in regards to financial and business metrics.
But one key take we didn’t touch on was Slack’s contract with Amazon Web Services (AWS), the cloud subsidiary of e-commerce giant Amazon that made nearly $26 billion last year. Slack’s SEC filing made note of a $250 million five year contract with AWS that runs from the 1st of May 2018 to the 31st of July 2023. The contract — broken down to $50 million each year — was a renewal of an already existing agreement with AWS, indicating Slack previously spent huge sums on the cloud hosting service.
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| Slack CEO Stewart Butterfield (left) and Slack board member Edith Cooper
Photograph by Stuart Isett/Fortune
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This contract is just another indication of Amazon’s strength in the cloud industry. Slack isn’t alone but is among other big companies that have huge contracts with AWS. To name a few, Pinterest has a $750 million five-year contract with AWS, Lyft has a $300 million two-year contract with AWS, Snap has a $1 billion five-year deal with AWS, Apple has reportedly committed to a $1.5 billion five-year spend on AWS.
These deals make a display of how big AWS is. The Amazon cloud unit recorded $7.7. billion revenue in Q1 this year, up 41% from $5.4 billion a year earlier. This made up 13% of Amazon’s total revenue for the quarter. Operating income from AWS for the quarter was $2.2 billion, roughly 50% of Amazon’s total operating income for the quarter. This indicates excellent profit margins in Amazon’s cloud business.
Amazon is a top player in the cloud computing market, alongside — significant competition from –the likes of Microsoft Azure, Google Cloud, IBM, Alibaba, SAP and Oracle.
