Some tech earnings calls to dig into. I wanted to get them all in together.
Microsoft indicated they were expecting impacts to their cloud computing business due to the current economic landscape and that their security products are growing – up 33% from a year ago. The number of customers with more than four workloads was up 50% year-over-year. Cloud computing offset the decline in Windows, and the company also warned it saw a noteworthy drop in PC sales and ad spending in September and expects both to continue this quarter. The company also noted “deal moderation” in their Microsoft 365 plans aimed at smaller businesses, and CFO Amy Hood suggested “partner transition work” impacted some revenue. We did see continued impact there [with small and midsize customers] in Q1, although it was not different than what we saw, frankly, in Q4,” Hood said on the call.
Google Cloud’s third-quarter beat Wall Street Estimates. Google Cloud revenue, which includes Google Cloud Platform services, Google Workspace collaboration tools, and other enterprise services, hit $6.9 billion, up 37.6% from $4.99 billion in the same quarter last year and 9.4% from this year’s second quarter. In case you’re wondering, Google Cloud is still in the red.
Amazon also noted a slowdown – they missed their revenue prediction and are also warning of further possible slowdowns.
Forrester weighed in here, too, and corroborated similar IDC data. By 2024, the majority of legacy applications will receive some modernization to improve efficiency. As a result, the deployment of virtual machines to accelerate computing will be drastically reduced in the coming year.
Forrester also predicts that Amazon Web Services will be under pressure in 2023 to match the security provisions of its main competitors in the cloud market — Google and Microsoft.
Gartner meanwhile, is warning that inflation could impact public cloud spending. With enterprises finding themselves under pressure to cut costs, the amount they spend on the public cloud could go down.
Why do we care?
One of the benefits of consumption models for customers is the ability to make changes. If customers slow, the provider feels that pain as well. This is a feature, not a bug. The road to the cloud was never going to be straight, so it’s worth noting that the slowdown will come at a macro level for the big providers.
That doesn’t mean it’s stopping; for many, it will stay the course. I’d note that planning for the variability would be a key takeaway for small providers.