Did Snap Make a Mistake With Its $3 Billion in Cloud Contracts?
When Snap (NYSE: SNAP) filed its IPO registration with the SEC, it revealed that it recently signed a $2 billion deal with Google, the Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary, to use its cloud platform to support Snapchat. Snap then went out and signed a $1 billion deal with Amazon (NASDAQ: AMZN) to use Amazon Web Services for additional cloud hosting.
These contracts have certain stipulations that require Snap to spend a certain amount with each company every year through 2021. And while they've been very beneficial to Snap's hosting costs per user, Snapchat's sluggish user growth puts a big question mark over whether Snap will meet its spending commitments with Google and Amazon.
Image source: Spectacles.com
Source: Fool.com
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