Amazon's Cloud Miss May Be Even Worse Than You Think (but It Makes Sense)
An industrywide price war may be in the works.
Anyone keeping a close eye on Amazon (NASDAQ: AMZN) these days certainly already knows the company's fourth-quarter cloud computing revenue fell just short of analyst estimates, marking the second consecutive quarterly miss for its cloud arm. That disappointment paired with lackluster guidance for the quarter now underway sent shares tumbling on Friday last week, just two days after they reached a record high. Investors seem afraid that the e-commerce giant's cloud business isn't going to remain the cash cow it was believed to be just a few months ago.
The thing is, the crowd may be right. Not only is Amazon Web Services (AWS) now coming up short of expectations, but it's losing cloud computing market share as well. Margin-crimping discounts may be inevitable in the near future.
As the chart below shows, Amazon Web Services' share of worldwide cloud revenue has been steadily dwindling since 2019, reaching a record low of 30% last quarter. Microsoft (NASDAQ: MSFT) and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google are responsible for most of this attrition, although a collective of smaller names like CoreWeave, Oracle (NYSE: ORCL), and Cloudflare (NYSE: NET) are suddenly coming on strong.
