Jan 23 (Reuters) – Slower cloud spending by inflation-hit companies is expected to dampen sales momentum at Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) and add to the sector’s problems which laid off thousands this month.

After years of meteoric growth, fueled more recently by remote work and study during the pandemic, demand for cloud computing has cooled over the past nine months and sales growth could slow further, analysts said.

Reuters Charts

End-user cloud spending on services, including those from the world’s largest providers – Amazon Web Services (AWS) and Microsoft’s Azure – is expected to rise 20.7% this year after growing 18.8% in 2022 and 52.8% in 2021, according to research firm Gartner. .

“Many companies are slowing down their migration to the cloud or asking for a lower price on their existing plans,” said Rishi Jaluria, analyst at RBC Capital Markets.

Microsoft chief executive Satya Nadella said last week that companies were treading carefully because “some parts of the world are in recession and others are anticipating one.”


Azure is expected to grow 31% in the December quarter, according to Visible Alpha, its weakest growth since the Redmond, Wash.-based company began reporting unit numbers in 2015.

AWS, Amazon’s lucrative cloud business from which it derives more than a quarter of its revenue, is expected to post a 24% increase in sales in the quarter. It increased by 28% during the July-September period.

The slowdown is also expected to weigh on Alphabet Inc (GOOGL.O), the third-largest cloud provider, a sign that the overall market is maturing, analysts said.

Reuters Charts

“Easy-to-move” workloads are already on the cloud and it will be harder for vendors to encourage enterprises to move the next batch of workloads to their platforms, brokerage firm UBS says more. early this month.

Microsoft has also been hit by a slump in the personal computer market, where its Windows software is still the dominant operating system. Amazon is also feeling the heat of slowing retail demand.


* Microsoft’s second-quarter revenue is expected to rise 2.5% to $53 billion, the smallest increase in six years.

* Amazon’s fourth-quarter revenue is expected to rise 5.8% to $145.40 billion.


* 47 of 53 analysts rate Microsoft shares “buy” or higher, and have a median price target of $285.

* Microsoft shares have fallen 19% in the past 12 months.

* 48 of 52 analysts rate Amazon’s stock as “bought” or higher, and have a median price target of $135.

* Amazon shares have fallen 32% in the past 12 months.

Reporting by Aditya Soni and Yuvraj Malik in Bengaluru; Editing by Anil D’Silva

Our standards: The Thomson Reuters Trust Principles.

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