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Verizon’s Big Uptake of Amazon Cloud Signals Cost Focus

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Nov. 20 2020, Updated 5:01 p.m. ET

Verizon has been using Amazon cloud since 2015

Verizon (VZ) is significantly increasing its use of Amazon’s (AMZN) cloud, with plans to migrate more than 1,000 business-critical applications to Amazon Web Services (or AWS), according to a recent statement by Amazon.

Verizon has been an Amazon cloud customer since 2015, but now it joins other large companies, including Comcast (CMCSA), that have chosen AWS as their preferred cloud provider.

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Verizon has lowered its ambitions to be a major cloud vendor

Verizon was once interested in becoming a big cloud provider. But its priorities seem to have changed, and last year it sold its data centers to Equinix (EQIX) and its cloud services business to International Business Machines (IBM).

Amazon and IBM are two of the five leading cloud vendors in the global market, but Amazon holds the largest share of the market at around 33%, according to Synergy Research.

Cloud is allowing businesses to better control costs

Companies are adopting cloud services for efficiency. For example, cloud services allow businesses to better control their costs and expenses, which can lead to improved profitability. So Verizon’s decision to migrate more of its applications to Amazon cloud could be motivated by a need to better control costs and expenses. The company has maintained a high level of spending recently as it invests in strategic acquisitions and building new businesses, looking to expand its addressable market and diversify its revenue sources.

Verizon’s operating expenses rose to $13.9 billion in the first quarter, while its capital expenditures were $4.6 billion, up 48.4% year-over-year. Its capex was $17.2 billion in 2017, and it’s looking to spend between $17 billion and $17.8 billion on capex this year.

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