The highest cloud providers, Amazon, Microsoft and Google, encounter ongoing spending slashes by clients

May 2, 2023: The cloud-computing market keeps increasing as companies move a surging number of workloads out of their own data centres, but executives from the leading cloud vendors stated this week that clients are looking for ways to trim costs.

The result is slowing revenue increase at the cloud divisions working by Amazon, Microsoft and Google. And regarding Amazon Web Services, the top manager in the space, it states a slimmer management margin and less profit for its parent firm.

AWS witnessed deceleration in the third and fourth quarters. It’s a phenomenon that started in 2022, as fears of a recession hit the economy. In the previous quarter, Microsoft finance chief Amy Hood spooked analysts with comments regarding a slowdown in December that she anticipated persisting.

On Thursday, Amazon finance chief Brian Olsavsky was the bearer of bad news for investors when he said that in April, AWS earnings growth had slumped by nearly five percentage points from the first-quarter growth rate of nearly 16%. The company’s stock price slid in response.

Amazon CEO Andy Jassy said, “We’re seeing enterprises continuing to be cautious in spending in this uncertain time.”

At Google, cloud growth is slowed to 28% from the year before in the initial quarter from 32% in the prior period. The downgrade occurred even as Google’s cloud segment hit profitability for the first time on record.

“We witnessed some headwind from slower consumption growth with customers looking to optimize their costs given that macro climate,” said Alphabet’s finance chief Ruth Porat on Tuesday’s earnings call.

Sundar Pichai, Alphabet’s CEO, stated that the slowdown is understandable.

“We lean into optimization,” he stated. “This is an important moment to support our customers, and we took a long-term view. And so it’s an area we are leaning in and trying to help customers progress on their efficiencies where we can.”

The companies remain optimistic that the cloud will remain a robust tech market. Businesses still have a different way to go before fully taking advantage of the benefits.

“People sometimes forget that 90-plus per cent of global IT spend is still on-premises,” Jassy stated.

And Hood stated that pretty soon, the financial comparisons will be against numbers from last year when the market was softening.

“When you start to anniversary that, you see that it gets a bit easier in terms of the comps every year,” Hood said.