Clouds disappear, profits fade

Clouds cool down

The revenue results of Amazon and Microsoft – the two giants that dominate the cloud market show that growth in this field is at its lowest level since companies started making data public in 2015 and continues. reduce.

Meanwhile, Alphabet (Google’s parent company), which has the smallest scale of its cloud business among the three, said that Google Cloud only grew 32%, the slowest rate since 2019.

The drop in cloud profits reflects the post-pandemic saving trend of corporate customers, whose budgets have been squeezed by inflation and interest rates.

“Once considered the most defensive revenue stream in the tech sector, we are now seeing investors question the cyclicality of this (cloud) business.”said several analysts at Bernstein.

Cloud services have long been a reliable source of income for Microsoft and Amazon.

The Windows maker posted around 50% cloud growth for each quarter of 2020, a time when the pandemic forced people to work and study from home. Meanwhile, the market leader, Amazon Web Service (AWS) reported a sales increase of about 30% during the same period.

However, things have changed over time.

Refinitiv data shows that AWS’s growth slowed to a record low 20% in the last three months of 2022, to just $21.4 billion, well below analyst estimates of 22.03 billion USD.

Meanwhile, although revenue from Microsoft’s Azure cloud business grew 18% compared to expectations from October to December, the company’s current quarter results forecast is only between $21.7 billion and $22 billion. billion USD, lower than the estimate of 22.14 billion USD.

Amazon CFO Brian Olsavsky admits the company expects slower cloud growth over the next few quarters. The same goes for Microsoft, the Windows maker says its Azure cloud business could drop 4-5 basis points in the March quarter.

Artificial intelligence becomes the new bet

Analysts say the potential for an artificial intelligence (AI) boom after ChatGPT’s viral success could spur demand for cloud services again. AI applications require huge computing power, which will be an opportunity for companies with services to help run this technology smoothly.

According to calculations by Goldstein, Associate Professor at the University of Maryland, it is estimated that ChatGPT spends $0.0003 per word generated. On average, each reply of this chatbot contains 30-40 words, equivalent to 0.01 USD. With 1 short conversation and 5 – 10 answers per day, the cost will be about 0.05 – 0.1 USD.

Currently ChatGPT runs on Azure cloud platform. According to Microsoft’s current fee, along with the rapid increase in the number of users since its launch, each day this chatbot costs the parent company about $ 100,000, equivalent to $ 3 million / month for computing power and The actual number can be much higher, up to 500,000 USD/day or 15 million USD/month.

Microsoft is an investor and partner of OpenAI, the company that owns the above-mentioned famous chatbot, but it will take time for this giant’s investment to bear fruit.

According to leaked records, the Windows maker will receive 75% of OpenAI’s profits until the full recovery of their approximately $10 billion investment. After collecting all the capital, OpenAI’s ownership structure will become: Microsoft (49%), other investors (49%) and ChatGPT’s parent company (2%).

“Advanced AI and the demand for related cloud services will take time to realize profitability, and they are unlikely to offset the current difficulties of the enterprise market over the next several quarters. next”says Lipsman, senior analyst at Insider Intelligence.

The Vinh (Synthetic)