Slowing cloud spend has investors spooked

Companies are spending less on cloud computing, the ultimate sign of belt tightening.

Credit: Jasmin Merdan / Getty Images

It’s been a big decade for cloud adoption.

  • In 2021, a survey found that 90% of businesses use cloud computing.
  • This year, the total percentage of corporate data living in the cloud jumped to 60%, up from 30% in 2015.

Three of tech’s biggest players — Amazon, Microsoft, and Google — have been beneficiaries of this trend, riding the cloud wave to record valuations last year.

What a difference a year makes

Last week, all three companies reported slowing growth in their cloud business units, leading to a swift decline in their stock prices.

But slowing cloud spend has even bigger implications:

  • Since cloud computing is charged based on usage, it’s been viewed as a broad marker of tech adoption across the economy.
  • Slowed spending signals that businesses are pulling out all the stops to cut back amid high inflation and fears of a recession.

With another aggressive rate hike expected this week, more cutbacks could be coming.

But there is a silver lining

WSJ’s Christopher Mims says companies are now switching from asking “what can we do?” to “what do we need to do?”

  • That shift should lead to more investments in products that actually provide value for customers and fewer investments into speculative ones.

Unfortunately, that means saying goodbye to weirdly fun products that nobody really needs, like flying selfie drones.

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