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Amazon's Warning About Its Cloud Business Frightens The Market

Amazon's Warning About Its Cloud Business Frightens The Market
Investors are concerned that growth in the profitable cloud business of Inc. is slowing.
As a result of Amazon's cloud division showing its worst quarterly growth since the company started separating the unit's sales in 2015, shares dropped by about 4% on Friday.
If losses continue, Amazon, one of the largest corporations in the world by market capitalization, will lose nearly $42 billion from its $1.126 trillion valuation. With approximately 80 million shares changing hands, it was also one of the most actively traded stocks on American exchanges.
James Cordwell, an analyst with Atlantic Equities, claimed that the decline was a result of Amazon Web Services' increased exposure to technology firms and start-ups, who have recently cut spending in response to rising interest rates and high inflation.
"This makes it more difficult to have confidence that Q2 will be the bottom in terms of the decline," Cordwell said.
In a post-earnings call on Thursday, Brian Olsavsky, head of finance at Amazon, predicted that as the company helps customers lower their costs, growth in the cloud business would decline by 5 percentage points this month from the 16% recorded in the first quarter.
The Azure cloud business of Microsoft Corp. grew at a 27% rate, in contrast to the results.
Microsoft's market share of cloud infrastructure climbed by a percentage point to 23% in the quarter, according to Synergy Research Group, while industry leader Amazon maintained its long-standing share range of 32% to 34%.
Although about 17 analysts raised their price targets for the stock, compared to the 10 who lowered their view, analysts were generally positive about Amazon's cloud prospects.
According to CFRA Research analyst Arun Sundaram, Amazon did not lose consumers to other major companies and that the slowdown was mostly due to the company's assistance in moving its customers to cheaper price tiers.
"Amazon is the clear market share leader in cloud computing and they will remain that way," Sundaram said.

Christopher J. Mitchell

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