Amazon’s cloud warning has investors worried

April 28 (Reuters) – Growth in Amazon.com Inc’s (AMZN.O) profitable cloud business is slowing and investors are jittery.

Shares fell nearly 4% on Friday as Amazon’s cloud business slowed in April after it posted its weakest quarterly growth since the company began breaking down unit sales in 2015.

As for Amazon, one of the largest companies in the world by market capitalization, it is on its way to getting rid of about $42 billion from its $1.126 trillion valuation, if the losses continue. It was also among the most traded stocks on US stock exchanges, with nearly 80 million shares changed hands.

James Cordwell, an analyst at Atlantic Equities, said the downturn reflects Amazon Web Services’ greater exposure to tech companies and start-ups, which have cut spending in recent months in the face of rising interest rates and high inflation.

“This makes it more difficult to be confident that the second quarter will be the bottom in terms of decline,” Cordwell said.

Amazon Chief Financial Officer Brian Olsavsky said on a post-earnings call Thursday that growth in the cloud business will drop 5 percentage points this month from the 16% recorded in the first quarter as Amazon helps customers lower their bills.

The results contrast with those of Microsoft Corp.’s (MSFT.O) Azure cloud business, which grew 27%.

Synergy Research Group He said Microsoft increased its share of the cloud infrastructure market by a percentage point to 23% in the quarter, while market leader Amazon remained within its long-term share range from 32% to 34%.

However, analysts were largely bullish on the cloud outlook for Amazon, with 17 raising their price targets on the stock, compared to 10 lowering their view.

The slowdown was largely the result of Amazon helping its customers move to lower price tiers, said Arun Sundaram, an analyst at CFRA Research, and the company wasn’t losing customers to other big players.

“Amazon is the market leader in cloud computing, and it will remain that way,” said Sundaram.

(Reporting) By Aditya Soni, Tyachi Datta and Akash Sriram; Editing by Anil D’Silva

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