As tens of thousands of layoffs hit their parent companies, expect Amazon Web Services (AWS), Microsoft Azure and Google Cloud to remain relatively resilient, because the cloud is a “pillar of strength,” according to a top Wall Street tech analyst.
“It's not bulletproof, but it's still a Rock of Gibraltar in a dark economic storm,” said Dan Ives, managing director and senior equity analyst at Wedbush Securities.
The so-called "Big 3" cloud providers have been enjoying solid double-digit revenue growth. And while there’s been a clear moderation of cloud spending amid a worsening macroeconomic environment, Ives expects growth to remain strong.
“The street is fearing a ‘falling off the cliff’ moment for cloud growth,” Ives told Silverlinings. “I think a big narrative in earnings season is going to be the cloud stalwarts seeing better-than-expected growth than feared. [Cloud is] a top priority of enterprises' ROI mobility, and it's really the biggest transformation enterprises have seen going back to the early 2000s.”
Only approximately 45% of organizations’ workloads have moved to the cloud – meaning the industry still is in the third or fourth inning, he said. And each cloud provider has billions of dollars in revenue backlogs that represent future cloud commitments.
Based on its checks, Wedbush is seeing 5% to 6% of cloud deals being pushed out or slipping, compared to 2% to 3% a year ago.
“I think there was less of a ‘budget flush’ this year than previous years,” Ives said, referring to end-of-year spending sprees.
The concern is less about whether the cloud itself is at risk and more about the “size of the gravy train,” said Hyoun Park, CEO and chief analyst at Amalgam Insights.
“Those growth rates are still well in excess of the rest of the IT sector, let alone the rest of the business world,” Park said. “The market of publicly traded companies outside of financial services typically grows about 7% percent per year. Beating the market in that regard is an accomplishment that all of the major cloud services will achieve.”
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