Slower cloud spending by inflation-hit businesses is expected to stall the sales momentum at Amazon.com Inc and Microsoft Corp and add to the troubles of the sector that laid off thousands this month.
After years of blistering growth, most recently fuelled by remote working and studying during the pandemic, cloud demand has cooled in the past nine months, and sales growth may slow further, analysts said. End-user cloud spending for services, including those from the world’s largest providers – Amazon Web Services (AWS) and Microsoft’s Azure – is expected to grow 20.7% this year after 18.8% growth in 2022 and 52.8% growth in 2021, according to research firm Gartner.
A lot of companies are slowing their migration to the cloud or asking for a lower price on their existing plans,” RBC Capital Markets analyst Rishi Jaluria said.
Microsoft Chief Executive Satya Nadella said last week that businesses were exercising caution as “some parts of the world are in a recession and other parts are anticipating one”.
Azure is set to grow 31% in the December quarter, according to Visible Alpha, it’s the weakest growth since the Redmond, Washington-based company started breaking out the unit’s numbers in 2015. AWS, Amazon’s lucrative cloud business from which it gets more than a quarter of its revenue, is expected to post a 24% increase in sales in the quarter. It grew 28% in the July-September period.