Amazon.com Inc’s (AMZN.O) profitable cloud business is stalling, and investors are concerned.
Amazon’s cloud business dipped in April, resulting in the company’s worst quarterly growth since it began breaking out the unit’s revenues in 2015.
If losses continue, Amazon, one of the world’s largest firms by market value, will lose nearly $42 billion from its $1.126 trillion valuation. With approximately 80 million shares changing hands, it was also one of the most traded stocks on US markets.
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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.
In comparison, Microsoft Corp’s (MSFT.O) Azure cloud business increased at a 27% annual rate.
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According to Synergy Research Group, Microsoft raised its share of the cloud infrastructure market by a percentage point in the quarter to 23%, while market leader Amazon maintained its long-standing share range of 32% to 34%.
Nonetheless, analysts were largely optimistic about Amazon’s cloud prospects, with approximately 17 raising their price targets on the stock, compared to the 10 who decreased their view.
According to CFRA Research analyst Arun Sundaram, the slowdown is mostly due to Amazon assisting its clients in moving to lower-price tiers, and the company is not losing consumers to other major companies.
“Amazon is clearly the market share leader in cloud computing, and they will remain that way,” Sundaram added.
