We highlight the example of Amazon’s AWS unit leveraging Snowflake – a competitor and partner – to drive AWS revenue.
Tickers mentioned: AMZN, GOOG, MSFT, SNOW.
Snowflake makes a living providing cloud-based Data & Analytics tools to data scientists and analysts. Snowflake’s offerings sit on top of AWS, Azure and GCP. Certain of its offerings compete directly with the three cloud platform giants (AWS Redshift in the case of Amazon). Why would AWS allow Snowflake to piggyback off of its platform? Why not protect Redshift by turning off SNOW’s AWS access? The answer is AWS generates significant revenue from Snowflake. Sure, competition exists between the two companies but if you are AWS – why not monetize Snowflake’s growth?
We estimate that as much as 50% of Snowflake’s $120 million in year-to-date (through October 31 2020) “Cost of Product Revenue” represents fees paid to the various cloud platforms that SNOW sits on top of. Perhaps 50% of that $60 million figure ($30 million), represents fees paid to AWS. “If it makes dollars, it makes sense” they say, especially if it concerns high margin dollars as is the case here with AWS.