Apple and other tech giants are outspending legacy companies on infrastructure

The big five tech companies in the U.S. spent $80 billion on "big ticket physical assets," twice the level of three years ago, and much more combined than established companies like General Motors.

According to a report this week by Bloomberg Businessweek, the five biggest tech companies in the U.S. — Apple, Alphabet/Google, Amazon, Facebook and Microsoft — spent a total of $80 billion in the last year on "big-ticket physical assets," a category that includes manufacturing equipment, specialized tools for product assembly, real estate investments, and even physical cables.

This is not only a surge in infrastructure spending from 2015, when the companies spent $40 billion, but it places them ahead of many old-economy firms, such as oil and automotive companies.

In something of an odd formulation, Businessweek said General Motors spent about one-tenth on infrastructure of what the five tech companies did, combined, in the last year. General Motors earned $145.6 billion in revenue in FY 2017, compared to $229 billion for Apple, $177.87 for Amazon, $110.85 billion for Google, $89.95 billion for Microsoft, and $40.6 billion for Facebook.

The magazine does not cite where it got its data, nor did it provide a ranking or break out the amount of spending by company.

The gradual increase in spending by Apple and the other tech firms likely has to do with changes in technology. Data centers have gradually become a more important factor for tech firms. In addition, Apple has opened a $5 billion new headquarters and has made significant other real estate investments, with Amazon looking to do the same.

Apple announced in January that it will spend $10 billion over the next 5 years on data centers. And in 2015, the company announced plans to ramp up its infrastructure spending in the coming years.

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7 Comments

lkrupp

said about 5 years ago

Just think about it. Someday those FAANG companies will become the “old-economy” “legacy” companies. Time marches on.

gmgravytrain

said about 5 years ago

I keep hearing how Apple is always spending money on data centers but unlike Amazon, Alphabet or Microsoft, I never hear anything about Apple making money from running a cloud business. Why is that? What exactly is Apple doing with those data centers if they're not making money from them? Apple seems to be the only major tech company that gets no praise from having a cloud business. It just seems as though Apple is letting all those data centers go to waste. As it is, I'm always hearing how much more Apple charges for cloud storage than any other company and how iCloud gives the least in terms of free storage. Based on how Wall Street rates Apple in terms of a cloud business, I'd think Apple isn't doing all that well in terms of value. With all the money Apple had to spend they could have hit a home run in terms of a cloud business, but instead Amazon is raking in all the market share and constant praise.

franklinjackcon

said about 5 years ago

gmgravytrain said:

I keep hearing how Apple is always spending money on data centers but unlike Amazon, Alphabet or Microsoft, I never hear anything about Apple making money from running a cloud business. Why is that? What exactly is Apple doing with those data centers if they're not making money from them? Apple seems to be the only major tech company that gets no praise from having a cloud business. It just seems as though Apple is letting all those data centers go to waste. As it is, I'm always hearing how much more Apple charges for cloud storage than any other company and how iCloud gives the least in terms of free storage. Based on how Wall Street rates Apple in terms of a cloud business, I'd think Apple isn't doing all that well in terms of value. With all the money Apple had to spend they could have hit a home run in terms of a cloud business, but instead Amazon is raking in all the market share and constant praise.

Depends on how you look at it - cloud can be a direct revenue generator or something that underpins a service. If you're looking at IaaS/PaaS then Amazon and Microsoft are miles ahead of everyone and Google a distant third. Most of the money is in business services. If Apple makes any money from storage as a service then it's a pittance compared to the others and I believe it's mostly sitting on Google servers anyway isn't it? In terms of SaaS, it's a similar story, most buyers are paying for business apps - Salesforce, Office etc.

Where Apple makes it's money is from things like music, photos, maps, Siri, etc which require cloud to run and some may not even be direct revenue generators but support the hardware business.

mknelson

said about 5 years ago

gmgravytrain said:

I keep hearing how Apple is always spending money on data centers but unlike Amazon, Alphabet or Microsoft, I never hear anything about Apple making money from running a cloud business. Why is that? What exactly is Apple doing with those data centers if they're not making money from them? Apple seems to be the only major tech company that gets no praise from having a cloud business. It just seems as though Apple is letting all those data centers go to waste. As it is, I'm always hearing how much more Apple charges for cloud storage than any other company and how iCloud gives the least in terms of free storage. Based on how Wall Street rates Apple in terms of a cloud business, I'd think Apple isn't doing all that well in terms of value. With all the money Apple had to spend they could have hit a home run in terms of a cloud business, but instead Amazon is raking in all the market share and constant praise.

Huh?

Apple's data centres are all used for services like iCloud, iTunes/Apple Music, App stores, etc.

https://appleinsider.com/articles/18/03/22/explosive-apple-services-revenue-expected-to-be-main-engine-for-apples-revenue-growth
https://www.cnbc.com/2018/05/01/apple-earnings-software-and-services-revenue.html

JWSC

said about 5 years ago

An idle thought. I wonder how many bitcoins one Apple data center could mint in a day? How long would it take to mint enough bitcoins to pay for the data center? Not that I’m advocating such a thing.