Cloud Big 3, the economic downturn direct hit –

Break earnings by three public cloud companies, including Amazon Web Services (AWS), Microsoft, and Google Cloud, have been announced. AWS and Microsoft showed sales growth less than expected and met Google Cloud man expectations. All three companies predicted that they would show slow growth for the time being under the influence of strong dollars and corporate investor sentiment.

The strong dollar has had a negative impact on the three cloud business portfolios, which have almost the same proportion of businesses and global businesses in the United States. Both business expenditures and investment expenditures increased due to strong dollars. The cost rise due to the increase in energy costs was also a malicious factor.

The three companies emphasized that the company’s cloud investment is shrinking, but it will continue to attract customers with the support of cost savings.

■ Three cloud companies, quarter report cards

On the 27th, AWS announced that it recorded sales of $20.5 billion and operating profit of $5.4 billion in the 3rd quarter earnings announcement in fiscal year. Sales increased 27% YoY and operating profit by 10%.

It was a decent report card, but the growth that has been shown has been broken. AWS has been growing year-on-year, with an average of 30% sales and 40% of its operating profit. The last quarter was recorded at the lowest growth rate after the financial report was released in 2014.

Microsoft announced on the 25th that it recorded sales of $50.1 billion, operating profit of $21.5 billion, and net profit of $17.6 billion in the first quarter of 2023 (July-September). Revenue increased 11% YoY and operating profit 6% YoY. Net profit fell 14% from the previous year. The weekly profit per share was $2.35, down 13% from the previous year.

Microsoft cloud sales were $25.7 billion, up 24% from the previous year.

In terms of productivity and business processes by category of business reports, sales in the business process were $16.5 billion, up 9% from the same period last year. Office commercial product sales and cloud service sales increased 7% thanks to the growth of Office 365 Commercial. Office consumer products and cloud service sales increased 7%. Dynamics products and cloud service sales increased by 15%. Intelligent Cloud’s sales were $20.3 billion, up 20% from the previous year. Server products and cloud service sales increased 22%. Azure and other cloud service sales grew 35%. However, the growth rate was lower than that of Wall Street, 36.9%.

Google Cloud announced on the 25th that it recorded $6.9 billion in sales and $699 million in operating losses in the 3rd quarter earnings report on the 25th. Revenue grew 38% YoY. Compared to the main business of Google and YouTube, the only one of the parent company Alphabet was less than expected.

■ Strength dollar, cloud growth is defeated by shrinking corporate investment psychology

All three companies emphasized the contraction of the foreign economy and the strong dollar.

AWS’s Chief Financial Officer of Brian Blavatsky (CFO) said, The world’s net sales in the third quarter were $1,27.1 billion, an increase of 19% year-on-year, excluding the disadvantage of the exchange rate fluctuations, excluding about 460 Basis Points (BP). As the dollar continued to strengthen during the quarter, the impact on the exchange rate was higher than the 390bp included in the third quarter.

He said the exchange rate headwind was $900 million.

It is expected to generate about $60 billion in capital investment during the total period of 2022, which is generally coincided with last year’s spending, he said. It means that the transition and transportation capital investment is expected to decrease.

It is mainly offset by an annual increase of $10 billion in technology infrastructure to support AWS footprint’s rapid growth, innovation and continuous expansion, he said. The organization of all sizes has affected sales growth as it evaluates technology and advertising expenditure.

AWS has declined in quarterly operating margin, and the AWS margin will change over time, with the balance of long-term customer contracts, investment, and price re-negotiation, he said. And the price of natural gas prices, he said. There is.

Amy Hood Microsoft CFO said, With the strong US dollar, the exchange rate has reduced the total sales by 5%. It reduced it.

Microsoft’s total margin ratio is 73%, an increase of about 2 points from the previous year, and the Microsoft Cloud’s total margin ratio is mainly reduced by an increase in energy costs, and the sales mix turned into Azure and the Azure Margin decreased by about 1 points. The sales margin has been reduced by about 4 points compared to the previous year due to the transition to sales mix to the cloud, the unfavorable exchange rate nuances and low Azure margins.

The total cost of the last three-quarter was $31.2 billion, a 20% increase in sales expenditures, said Ruth Port Google’s chief financial officer (CFO). Did.

3Q results reflect the increase in foreign exchange’s headwinds considering the continuous strength of the United States, he said. We continue to focus on the long-term path for the profitability of Google Cloud, and we are trying to relocate investments in attractive opportunities. Said.

We added 12,765 people in the third quarter of the number of alphabet employees, and more than 2,600 people joined Google Cloud, and the fourth quarter would slow down to half of the additional 3Q. It was revealed.

■ Emphasis on cloud advantages such as cost efficiency and elasticity

Overall, cloud companies are focusing on supporting customers’ cost savings as they are affected by the size of corporate customers.

In the meantime, the company has the cost efficiency on the strength of innovation acceleration and agility as a cloud.

Brian Blavatsky AWS CFO said, Macroeconomic uncertainty continues, and AWS customers are focusing on cost management. I’m trying to work.

One of the true values of cloud computing is to change fixed costs to many customers and to reduce customers’ costs, he said. The business is growing absolutely because it added $4.5 billion to $16 billion in sales.

Microsoft is fully reduced.

The relocation to the cloud is the best way to do more work at a low cost today, said Satin Adela Microsoft, CEO. It helps to mitigate the risk of.

Amy hooded Microsoft CFO said, The number of long-term Azure and Microsoft 365 contracts has continued to increase over all transactions. More than half of the $10 million Microsoft 365 contract occurred in E5.

The same is true for Google Cloud. The long-term trend that leads the introduction of clouds is continuing to play a more powerful role in the uncertain macro-era era, said Sunday Pica Richie. It saves and helps to secure new growth engines.

When companies around the world are trying to increase efficiency, Google Cloud’s open infrastructure offers a valuable path that reduces and modernizes IT costs.

■ For the time being, the company’s performance is inevitable due to deterioration of the foreign economy

All three emphasizes the high growth potential of the cloud market, but nominal earnings reductions are inevitable. Each company has predicted the next quarter and afterwards as a slower growth than before. As a result, cost optimization is proposed as a countermeasure.

Brian Blavatsky AWS CFO said, The biggest individual factor in Guidance in the fourth quarter will be a foreign exchange and includes an adverse effect of 460bp annually. I want to reduce my spending.

Amy Hood Microsoft CFO said, We will reduce the total sales growth by about 5 points and reduce the total cost and operating cost increase by about 3 points based on the US dollar and current exchange rate. We expect 3 points in negative exchange rate impacts on sales growth of productivity and business processes, 6 points in intelligent cloud, and more in more personal computing.

This year’s fiscal year is expected to have about 5 points for annual sales growth based on the current exchange rate, he said. The exchange rate will reduce the increase in cost and operating costs by about 3 points.

Ruth Port Google CFO asked questions about the growth potential and profit improvement of the cloud business. I keep investing.

The key to stable performance depends on whether large corporate customers have long-term contracts. Microsoft explains the stability of the cloud business by increasing the renewal of large contracts and increasing new contracts. AWS and Google Cloud emphasized that despite the decline in short-term investment by customers, the contract size of the cloud part related to long-term business investment is increasing.

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