Amazon’s cloud warning rattles investors By Reuters
© Reuters. FILE PHOTO: The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018. REUTERS/Pascal Rossignol/File Photo
By Aditya Soni
(Reuters) -Growth in Amazon.com Inc (NASDAQ:)’s lucrative cloud business is slowing and investors are worried.
Shares fell 4% on Friday as Amazon’s cloud business slowed in April after posting its weakest quarterly growth since the company began breaking out the unit’s sales in 2015.
Amazon, one of the largest companies in the world by market capitalization, is on track to shed about $50 billion from its valuation of $1.126 trillion, if losses hold.
Atlantic Equities analyst James Cordwell said the downturn reflected Amazon Web Services’ greater exposure to technology companies and start-ups, which have slashed spending in recent months in the face of rising interest rates and high inflation.
“This makes it more difficult to have confidence that Q2 will be the bottom in terms of the decline,” Cordwell said.
Amazon’s finance chief, Brian Olsavsky, told a post-earnings call on Thursday that growth in the cloud business would fall by 5 percentage points this month from the 16% recorded in the first quarter as Amazon helps clients lower their bills.
The results are in contrast to those of Microsoft Corp (NASDAQ:)’s Azure cloud business, which grew at 27%.
Synergy Research Group said Microsoft had increased its share of the cloud infrastructure market by a percentage point to 23% in the quarter, while market leader Amazon stayed within its long-standing share band of 32% to 34%.
Still, analysts were largely upbeat about Amazon’s cloud prospects, with about 17 raising their price targets on the stock, compared with the 10 that lowered their view.
CFRA Research analyst Arun Sundaram said the slowdown was largely a result of Amazon helping its clients move to lower-price tiers, and the company was not losing customers to other big players.
“Amazon is the clear market share leader in cloud computing and they will remain that way,” Sundaram said.