WASHINGTON: Amazon.com Inc’s lucrative cloud business is slowing growth, and investors are worried.
Shares fell nearly four percent as Amazon’s cloud business slowed in April after posting its weakest quarterly growth since the company broke 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 42 billion dollars from its valuation of 1.126 trillion dollars if losses hold. It was among the most traded stocks on United States exchanges, with nearly 80 million shares changing hands.
Atlantic Equities analyst James Cordwell said that the downturn reflected Amazon Web Services’ greater exposure to technology companies and start-ups, which slashed spending in recent months in the face of increasing interest rates and high inflation.
Cordwell said, “This makes it more difficult to have confidence that Q2 would be the bottom in terms of the decline,”
Amazon finance chief’s stance
Amazon’s finance chief, Brian Olsavsky, told a post-earnings call that cloud business growth would fall by five percentage points this month from the 16 percent recorded in the first quarter as Amazon helps clients lower their bills.
The results contrast those of Microsoft Corp’s Azure cloud business, which grew 27 percent.
Synergy Research Group said that Microsoft had increased its share of the cloud infrastructure market by a percentage point to 23 percent in the quarter, while market leader Amazon company stayed within its long-standing share band of 32 percent to 34 percent.
Analysts were largely upbeat about Amazon’s cloud prospects, with about 17 increasing their price targets on the stock, compared with the ten that lowered their view.
CFRA Research analyst Arun Sundaram said that the slowdown largely resulted from Amazon helping its clients move to lower-price tiers, and the company wasn’t losing customers to other big players.
Sundaram said that “Amazon is the clear market share leader in cloud computing, and they will remain that way,”
