In brief: 3M gave Amazon the right to buy up to 3.2 million 3M shares, earned as Amazon buys up to $6 billion of 3M’s data center parts over seven years.
Implications:
Volume: Your purchase volume can earn a stake in a supplier as well as a lower price.
Second source: 3M added a contract manufacturer, and its CEO says cloud buyers want more than one source before they sign on.
The News
3M issued Amazon a warrant to buy up to 3,162,015 3M shares at $164.89 each over seven years, tied to Amazon’s purchases of 3M optical connectivity and other data center products, according to a filing. Of those shares, 85% vest as Amazon pays for the products, with full vesting once its payments reach $6 billion.
The main product is Expanded Beam Optics, or EBO, a 3M fiber connector that widens the light beam across a small gap instead of pressing two fiber ends together, so dust and wear do less damage. Microsoft has said it would use EBO across its cloud and AI infrastructure, and 3M said Amazon Web Services was one of five more cloud providers testing it.
On its third-quarter earnings call, CEO Bill Brown said Amazon has not promised to buy anything. “There’s no volume commitments here,” he said. “We got to earn a right to that.” He expects Amazon’s buying to start ramping late next year and to grow in 2028. Brown also expects EBO to bring in about $40 million this year and $80 million to $100 million in 2027, within data center sales he put at about $700 million this year, up from about $550 million.
To back the deal with supply, 3M signed a contract manufacturing agreement with Genius Electronic Optical, a Taiwanese maker of precision optics for consumer devices, and took a 4.7% stake in the company. Brown said 3M has doubled its own capacity to more than 10 million ferrules a year, the small part that holds and lines up the fiber, and that Genius could make multiples of that each month. A Multi-Source Agreement that sets common EBO specs, so other companies can make parts that fit, has grown from 17 members to 63, he said.
Why It Matters
The warrant works like a volume rebate paid in shares: the more Amazon spends with 3M, the more of 3M it can buy at a fixed price.
Milestones: The other 15% of the shares vest on event-based milestones.
Booked as a price cut: Plug Power, an earlier supplier to issue such warrants, booked most of their value as a reduction of revenue, the same treatment a price cut to a customer gets.
Who carries the risk: Amazon gains if EBO sells well, while 3M pays to build capacity for orders that may never come.
Peer Insights
Amazon has traded volume for supplier stock before, and other big buyers, such as GM with its supplier financing, have used their size to lock in supply:
Amazon: In 2017, Plug Power gave Amazon a warrant for up to 55.3 million shares, most of it vesting as Amazon paid up to $600 million for fuel cell systems at its distribution centers.
Walmart: Walmart also signed a near-identical warrant with Plug Power for fuel cells across its distribution centers: the same 55.3 million shares tied to up to $600 million in payments, at a higher exercise price.
Meta: Meta agreed to buy up to $6 billion of Corning’s fiber, cable and connectivity products over several years and became the anchor customer for an expanded Corning cable plant in Hickory, NC.
What’s Next
Q4 into early 2027: 3M plans to scale EBO production at Genius, Brown said.
Late 2027: Amazon’s purchases start to ramp, according to 3M, and become more meaningful in 2028.
Photo: Tony Webster, CC BY 2.0, via Wikimedia Commons
