Amazon Web Services logo on the Web Summit in Lisbon.
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The cloud-computing market keeps growing as corporations move an increasing variety of workloads out of their very own data centers, but executives from the leading cloud vendors said this week that clients are on the lookout for ways to trim costs.
The result’s slowing revenue growth on the cloud divisions run by Amazon, Microsoft and Google. And for Amazon Web Services, the leader within the space, it means a slimmer operating margin and fewer profit for its parent company.
It is a phenomenon that began in 2022, as fears of a recession hit the economy. AWS saw deceleration within the third and fourth quarters, and last quarter Microsoft finance chief Amy Hood spooked analysts with comments a few slowdown in December that she expected to persist.
Amazon finance chief Brian Olsavsky was the bearer of bad news for investors on Thursday, when he said that in April, AWS revenue growth had slumped by about five percentage points from the first-quarter growth rate of virtually 16%. The corporate’s stock price slid in response.
Amazon CEO Andy Jassy said “what we’re seeing is enterprises continuing to be cautious of their spending on this uncertain time.”
At Google, cloud growth slowed to twenty-eight% from a yr earlier in the primary quarter from 32% within the prior period. The deceleration occurred whilst Google’s cloud segment reached profitability for the primary time on record.
“We saw some headwind from slower growth of consumption with customers really trying to optimize their costs on condition that macro climate,” said Ruth Porat, Alphabet’s finance chief, on Tuesday’s earnings call.
Sundar Pichai, Alphabet’s CEO, said the slowdown is comprehensible.
“We’re leaning into optimization,” he said. “That is a crucial moment to assist our customers, and we take a long-term view. And so it’s definitely an area we’re leaning in and attempting to help customers make progress on their efficiencies where we are able to.”
The businesses remain optimistic that cloud will proceed to be a robust marketplace for tech, as businesses still have a protracted strategy to go before they’ll be fully profiting from the advantages.
“People sometimes forget that 90-plus percent of global IT spend is still on-premises,” Jassy said.
And Hood noted that pretty soon the financial comparisons can be against numbers from the purpose last yr when the market was softening.
“Whenever you begin to anniversary that, you do see that it gets slightly bit easier when it comes to the comps year-over-year,” Hood said.
WATCH: Ongoing deceleration in IT spending not reflected in tech earnings
