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Wow, turns out cloud sales can slow down – eh, Amazon, Google?

As tech giants 'optimize' workforces, world optimizes amount of money it spends on computing services

Cloud giants Google and Amazon Web Services' latest financial results indicate the cloud computing adoption is finally slowing as customers press pause amid the economic downturn taking place across much of the West.

Amazon Group's overall sales grew 9 percent to reach $149.2 billion in the fourth quarter, while its AWS sales increased 20 percent year-over-year to $21.4 billion.

For the full year 2022, Group net sales increased 9 percent to $514.0 billion in 2022, and AWS was up 29 percent year-over-year to $80.1 billion, a marked difference from the early years of the pandemic.

AWS added new customers over the last year, including the Nasdaq stock exchange and Brookfield Asset Management. Brian Olsavsky, senior veep and CFO, said the slowdown began in the third quarter as "enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions." The trend continued in the fourth quarter.

"As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters. So far in the first month of the year, AWS year-over-year revenue growth is in the mid-teens," he said on an investor call.

Google also posted its results. Overall, Alphabet, which owns Google's search and cloud businesses, disappointed the markets with its fourth quarter revenue of $75.32 billion, up just one percent year-on-year. It reported $59 billion in advertising revenue, a decrease of 3.6 percent from the same period in 2021.

Cloud revenue reached $7.3 billion, up 32 percent, which again marked a slowdown of growth in recent years of 50+ percent. Operating losses for the unit, however, narrowed to $480 million from $890 million.

Google is set to accrue $1.9 billion to $2.3 billion related to the 12,000 job losses it announced last month, the majority of which will be recognized in the first quarter of 2023.

Google has high hopes for its data engineering, analytics and AI projects, including DeepMind, the UK-founded business which celebrated achievements in the board game Go and protein folding. Its financial performance is set to be reported as part of the main business.

"To reflect the increasing DeepMind collaboration with Google Services, Google Cloud and Other Bets, beginning in the first quarter, DeepMind will no longer be reported in Other Bets and will be reported as part of Alphabet's corporate costs," said Alphabet chief financial officer Ruth Porat during an investor call. ®

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