WASHINGTON: Leading US tech companies, including Microsoft, Google-owner Alphabet, Amazon.com, and Meta Platforms, are poised to signal a rebound in their cloud businesses as signs of economic resilience encourage increased technology spending from clients. The companies are set to report earnings over the coming weeks, providing a test for their substantial valuations and the broader market rally driven by optimism over artificial intelligence (AI).
Amid hopes that integrating AI into their products will drive the industry’s next growth cycle, these tech giants have aggressively pursued AI-based offerings this year. However, analysts note that the revenue impact from these efforts will take time to materialize.
Slow Growth for Tech Giants in Cloud Market
For the cloud market’s major players, including Amazon, Microsoft, and Alphabet, the April-June quarter is expected to show continued slow growth in their cloud computing businesses, which have historically been lucrative. Analysts predict Amazon and Alphabet will report their lowest-ever growth rates for cloud computing at 9.8% and 24.4%, respectively. Meanwhile, Microsoft’s Intelligent Cloud, which houses Azure, is expected to grow at 13.7%, marking its slowest rate since 2017.
Despite the subdued cloud growth in the recent past, analysts are optimistic about an impending change in the trend. Many believe that while the macroeconomic conditions remain soft, they are not deteriorating further, and companies are adapting to the situation.
The current quarter will also benefit from easier year-ago comparisons as the cloud slowdown began in the September quarter of 2022. Additionally, a recent survey of enterprise technology buyers indicates that the majority of them are funding projects related to generative AI, expecting an increase in IT spending this year compared to 2022.
Meta Platforms, the parent company of Facebook, is expected to witness a surge in revenue at its fastest pace in six quarters, fueled by a recovery in the digital advertising market as consumer spending remains robust. This digital ad market recovery will also support Alphabet, with Google Search maintaining its market share despite the rise of Microsoft’s AI-powered Bing. Alphabet is expected to report 4.5% revenue growth in the April-June period, its best performance in three quarters.
The upcoming quarterly results for Microsoft, Alphabet, Meta, and Amazon, scheduled for July 25, July 26, and August 3, respectively, will provide insights into these tech giants’ strategies amid a dynamic market landscape.
