Amazon and Microsoft’s cloud falters, as AI soars
Investors are bracing for slowing growth in cloud businesses!
The units are critical for the performance of both stocks
The buzz around artificial intelligence that’s helped juice gains for Microsoft Corp. and Amazon.com Inc. this year may also be masking struggles in a business far more critical to the pair’s bottom lines.
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Amazon and Microsoft’s cloud falters, as AI soars
Investors are bracing for slowing growth in cloud businesses#amazon #Microsoft #ai #CLOUD pic.twitter.com/aF1bCYcho7— The_Journalbiz (@the_journalbiz) April 21, 2023
Bloomberg chart on Amazon & Microsoft
Once-booming demand for cloud-computing services is slowing as businesses rein in spending amid economic uncertainty. And when Microsoft and Amazon report results next week, analysts anticipate the slowest revenue growth for their cloud-computing businesses since the firms started breaking out performance last decade.
Trouble is, not much of that is priced into stocks that are up solidly this year, according to Ted Mortonson, a technology strategist at Robert W. Baird & Co.
“Given how much they’ve run, the setup for earnings is horrible,” Mortonson said. “I don’t know why you’d want to be over your skis going into first-quarter prints.”
Microsoft shares fell 0.8% on Thursday while Amazon slipped 0.3%. The Nasdaq 100 Index fell 0.7%.
Microsoft and Amazon Have Shrugged Off Slower Cloud Growth
Microsoft’s Intelligent Cloud unit, which is home to its Azure cloud services business, accounted for 38% of its revenue and 39% of its operating income in 2022.
Amazon Web Services was the fastest-growing of the Seattle-based company’s major businesses last year and generated $22.8 billion in operating income. The rest of Amazon’s businesses combined posted a $10.6 billion operating loss.
