Dusseldorf It was a scary week for the big US tech companies. High inflation and economic uncertainty are not only causing the online advertising market and PC sales to collapse, they are also making it difficult to sell software. After the announcement of disappointing quarterly figures, the share prices of Amazon, Microsoft and Google’s parent company Alphabet plummeted at times; Hundreds of billions of dollars in market value were wiped out.
But there is a ray of hope for the corporations: the cloud. Based on the business figures for the third quarter, the consulting firm Snyergy Research calculated cloud sales at a total of 57.5 billion dollars – 24 percent more than in the previous year. The three providers Amazon, Microsoft and Google dominate the market with a share of 72 percent.
“It speaks to the strong growth of cloud computing when the market is growing so strongly despite obstacles,” said John Dinsdale, Synergy’s principal analyst. The expert is thus alluding to the strong dollar. The three companies operate worldwide, but have to balance in dollars. Due to the strong domestic currency, sales from Europe or Japan are lower when converted into dollars.
Amazon, Google and Microsoft benefit from billions in investments
“Despite all the crises, we do not see that orders in the cloud business are decreasing,” says Gregor Pillen, head of IBM Germany, the Handelsblatt.
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The providers of cloud services have recorded lush growth rates in recent years: At least since the corona pandemic, many companies have been investing heavily in digital transformation. Without the services, which are available at the touch of a button and from anywhere, nothing works.
“The basic principle of the cloud is greater efficiency,” says IBM Germany boss Pillen. “The hardware in the basement is not used at the weekend. With the cloud you save energy and can use skilled workers for other activities.”
Amazon, Microsoft and Google offer storage space, computing power and numerous additional services on their platforms that customers can use to control apps, network factories and analyze data with artificial intelligence.
The three groups continue to benefit from the massive investments in digitization. However, the momentum has slowed noticeably in recent months: the growth rates of all companies are lower than they were a year ago.
The Amazon division AWS grew by 27 percent to 20.5 billion dollars – in the same quarter of the previous year it was still 37 percent. “The ongoing macroeconomic uncertainties have caused AWS customers to focus more on cost control,” said Amazon CFO Brian Olsavsky.
>> Read here: Black week for Big Tech – stock market value falls by 700 billion dollars in three days
Similarly at Microsoft: The “Intelligent Cloud” segment with products such as Office software and the Azure platform grew by 20 percent to $20.3 billion, after 31 percent a year ago. And Google, number three in the cloud infrastructure market, also slowed, growing 37 percent to $6.9 billion.
Cloud boom likely to continue
Business is also worse than a few months ago for a number of companies that offer software via the cloud. Salesforce, for example, the market leader in sales and marketing solutions, lowered the outlook because contract negotiations with customers are taking longer.
However, it is a question of standards. In many sectors of the economy, companies would be happy to see growth rates in the double digits, especially in a business of this size. However, due to the extraordinary boom of the past ten years, the expectations of cloud service providers are high.
Shareholders may be disappointed in the short term, but they should continue to benefit from the cloud boom in the medium and long term. “Corporate IT spending is recession-proof as CEOs and CFOs increase spending on digital business initiatives rather than slashing IT budgets,” said John-David Lovelock, an analyst at market researcher Gartner.
>> Read also: SAP defies the economic crisis – and promises increasing profits
IBM Germany boss Pillen sees a shift: “A shift can be seen in the digital budgets of companies, must-topics such as compliance or cybersecurity are receiving more attention.”
Also in focus: using digital technologies to introduce new products and services and increase efficiency. SAP, for example, benefits from this. The Dax Group’s business management software enables processes to be automated.
The sale of large IT projects is challenging in the crisis, CEO Christian Klein told the Handelsblatt. “Our advantage is: We support the customer in dealing with the most urgent requirements” – such as process automation. Not least because of this, the cloud business grew faster than expected on the capital market.
More: IT companies are raising prices for software and cloud services sharply