Neuberger Berman Principal Analyst & Managing Director Daniel Flax provides insight into tech stocks in “Making Money”.

The tech downturn has finally hit the cloud. The biggest players can pay the biggest price., Microsoft Corp.
Google reported some disappointing news about its cloud services in its December quarterly report. Alphabet Inc., the parent company of Amazon and Google. Sales growth in this segment was below Wall Street’s forecast. Growth of Microsoft Azure services was on target but still markedly slowed by 15 percentage points year over year. Amazon and Microsoft, the biggest players in the space, also pointed out the slowdown in their respective teleconferences, warning of further slowdowns this quarter.
That shouldn’t come as a major surprise. Demand for cloud-computing services was growing rapidly even before the pandemic as corporations moved away from legacy on-premise software. Covid-19 juiced that growth even more as companies suddenly found they needed to operate remotely. But the inevitable cooling of that demand has also run headlong into a global economic slowdown, forcing businesses to scale back their spending. Some industries are getting hit harder than others; in Amazon’s earnings call Thursday, Chief Financial Officer Brian Olsavsky called out reduced mortgage volume and cryptocurrency trading as factors affecting usage of the company’s AWS cloud service in the recent quarter.
Attendees at the annual Inc Cloud Computing Conference walk in front of the Amazon Web Services logo on November 30, 2017 in Las Vegas, Nevada, USA. REUTERS/Salvador Rodriguez/File Photo (REUTERS/Salvador Rodriguez/File Photo/Reuters Photos)

Amazon is leading the public cloud business before most people even know what it is.
The company first announced the launch of “web services” in 2002, shortly after the dot-com crash. The company began reporting financial results for its rebranded AWS division in 2015, when the company exceeded $5 billion in annual revenue. That amount has since grown to more than $80 billion, making AWS the largest single enterprise software company outside of Microsoft.

Oracle spends because it has a big tomorrow.

But Amazon’s sheer size and reliance on AWS for most of its operating profits makes the e-commerce giant more vulnerable to the adverse effects of a recession. mister.
Olsavsky noted that AWS’ revenue growth slowed through mid-January after hitting an all-time low of 20% year-over-year in the fourth quarter. This is below the average growth range of 20% that Microsoft forecast for smaller Azure cloud services in the March quarter. And while AWS is still bigger than Microsoft’s Azure and much bigger than Google Cloud Platform, the latter two have much more lucrative legacy businesses. AWS generated $22.8 billion in operating income from Amazon in 2022, and the company’s massive retail operation lost nearly $12 billion in that year.
The sign outside the Microsoft campus in Mountain View, CA, USA on Thursday, July 22, 2021 (Photo: David Paul Morris/Bloomberg via Getty Images/Getty Images) is a giant for at least the first half of this year. This problem can be exacerbated by changes in the way cloud clients organize transactions.
In a report last week, analyst Timothy Horan of Oppenheimer said more businesses are shifting to term-based billing for cloud compute workloads, which he estimates can lead to savings in the range of 35%–70% over paying for usage on demand. “This is a major near-term headwind” for cloud-service providers, he wrote.


For Amazon, the cloud slowdown comes at a particularly inopportune time, as the company is also still working to absorb an overbuild of its retail fulfillment network. It might also be facing new regulatory heat: The Wall Street Journal reported last week that the Federal Trade Commission is preparing a potential antitrust lawsuit against the company. That creates additional pressure on Chief Executive Officer Andy Jassy, who took the reins at Amazon in 2021 after making a name for himself through his highly successful shepherding of AWS.
Amazon Senior Vice President Andy Jassy speaks during a keynote speech at the Re:Invent conference in Las Vegas, Nevada November 28, 2012. REUTERS/Richard Brian (UNITED STATES – Tags: BUSINESS SCIENCE TECHNOLOGY) (REUTERS/Richard Brian / Reuters Photos)

Mr. Jassy even broke from a long Amazon tradition and joined the company’s earnings call last week, where he maintained that “we have a lot of growth in front of us” in the cloud, given that the majority of global corporate tech spending remains tied to on-premises software and services. But Amazon’s stock price has slumped since last week’s results and news of the possible FTC suit, and it is now off more than 35% over the last 12 months—the worst performance among big tech peers Apple, Microsoft, Alphabet and now even Facebook-parent Meta Platforms Inc. Mr.
Yasi will have to make it rain soon.

Ticker Security Last Modified Change % AMZN AMAZON.COM INC. 99.54 +1.
93 +1,98%AAPL APPLE INC. 153,85 +2,84 +1.
95.00 +0.14 +0.15% META META PLATFORM INC. 179.
43 +5.28 +3.03%
Click here to download the FOX Business App.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *