Amazon Web Services logo on the Web Summit in Lisbon.
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The cloud computing market continues to grow as corporations move more and more workloads out of their very own data centers, but executives from leading cloud providers said this week that customers are on the lookout for ways to chop costs.
The result’s a slowdown in revenue growth within the cloud divisions it manages Amazon, Microsoft AND Google. And for Amazon Web Services, the industry leader, meaning less operating margin and less profit for the parent company.
It is a phenomenon that began in 2022, when fears of a recession appeared within the economy. AWS saw a slowdown within the third and fourth quarters, and Microsoft’s chief financial officer Amy Hood scared analysts with comments in regards to the slowdown in December, which she expected to proceed.
Amazon’s chief financial officer Brian Olsavsky was the harbinger of bad news for investors on Thursday when he said AWS’s April revenue growth fell by about five percentage points from a first-quarter growth rate of nearly 16%. In response, the corporate’s share price fell.
Amazon CEO Andy Jassy said: “We see businesses continuing to watch out with their spending in these uncertain times.”
At Google, cloud growth fell to twenty-eight% year-on-year in the primary quarter from 32% within the prior period. The slowdown occurred at the same time as Google’s cloud segment turned profitable for the primary time in history.
“We saw some hurdles with slower consumption growth and customers really desired to optimize their costs given this macro-climate,” Alphabet’s head of finance Ruth Porat said in a earnings call on Tuesday.
Alphabet CEO Sundar Pichai said the slowdown is comprehensible.
“We deal with optimization,” he said. “That is a crucial moment to assist our customers and we’re looking long run. So this is certainly an area we lean into and attempt to help customers make progress on their performance where possible.”
Firms remain optimistic that the cloud will proceed to be a powerful marketplace for the technology as corporations still have an extended approach to go before they will fully reap the advantages.
“People sometimes forget that greater than 90 percent of world IT spending remains to be on-premise,” said Jassy.
And Hood noted that soon the financial comparisons can be at odds with the numbers from last yr when the market was softening.
“While you start celebrating your anniversary, you see it gets a bit easier yr after yr in the case of builds,” said Hood.
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