The tech industry is facing a big problem right now: a slowdown in cloud computing.
In the past week, the three major U.S. cloud computing companies—Microsoft Azure, Amazon AWS, and Alphabet’s Google Cloud—all announced that their revenue growth rates have fallen sharply. This is not only a problem for these three companies, but also for related chip and equipment manufacturers.
For the December quarter, Microsoft’s (MSFT-US) Azure fell to 31% from 35% in the previous quarter; Amazon’s (AMZN-US) AWS growth slowed to 20% from 28%; Alphabet’s (GOOGL-US) Google Cloud The growth rate dropped from 38% to 32%.
Comments on recent business trends aren’t too good either. On a conference call with investors, Microsoft said business was weaker through the end of December; Amazon said Thursday that AWS’s January growth rate fell to around 15%.
In theory, cloud spending should be more resilient in an economic slowdown as businesses move from on-premises technology systems to the cloud, offering greater flexibility, reliability and efficiency, but the current economic uncertainty seems Even growth plans in the cloud have been scaled back, forcing companies to slash technology budgets.
After reviewing recent corporate earnings, MoffettNathanson analyst Sterling Auty reported on Friday that cloud computing growth is slowing and may continue to slow until the end of the March quarter.
It’s not just cloud computing business customers who are cutting budgets. Facebook parent company Meta Platforms (META-US) announced on Wednesday that its capital spending budget for this year will be reduced to a range of $30 billion to $33 billion from a previously estimated range of $34 billion to $37 billion, as the outlook declines and data must be more efficiently mastered Center construction work.
Citing economic headwinds, industry research firm TrendForce this week lowered the expected growth rate of server purchases by the four major U.S. technology companies (Microsoft, Google, Amazon AWS, and Meta) in 2023 from 6.9% to 4.4%.
The slowdown in cloud computing and data center demand has hurt server chip and memory chip makers, including Intel (INTC-US), Advanced Micro Devices (AMD-US), Micron Technology (MU-US) and Nvidia (NVDA-US).
