Big Tech Expected to Trim Cloud Computing Spend in 2023

For 2023, folks on Wall Street anticipate a notable slowdown in spending by major technology firms on the warehouse-size data centers that comprise the cloud.

For 2023, folks on Wall Street anticipate a notable slowdown in spending by major technology firms on the warehouse-size data centers that comprise the cloud.

Though big tech pushed forward by aggressively spending on building a cloud computing infrastructure during the June 2022 quarter, experts say they wouldn't count on that approach continuing, according to news from Investor's Business Daily.

For 2023, folks on Wall Street anticipate a notable slowdown in spending by major technology firms on the warehouse-size data centers filled with advanced computing and communications technology that comprise the cloud. Their projections suggest that cloud spending growth could slow from the mid-20% range down to mid-single digits.

At Susquehanna Financial, analyst Mehdi Hosseini puts forth numbers on big tech spending on cloud infrastructure, expecting it to grow 23% in 2022, a slight dip from 25% growth last year. For 2023, Hosseini forecasts “flat to up to 5% year-over-year” growth.

“We expect a digestion/slowdown in 2023,” he said in a report. “In our view, the 'calm' in the current cloud spend is like the 'calm' before the hurricane hits the beaches.”

Big Tech: Cloud Computing 

Wall Street analysts vary in how they see capital spending on cloud computing. The three household name providers of cloud services—Amazon.com's Amazon Web Services, Microsoft and Alphabet's Google—are often included in forecasts.

Most analysts include Facebook parent Meta Platforms. Some include Apple or Alibaba Group and second-tier cloud players such as IBM and Oracle.

At Morgan Stanley, analyst Erik Woodring tracks U.S. spending by the top 10 cloud companies. He excludes Amazon because the tech giant doesn't break out cloud infrastructure spending from warehouse fulfillment and logistics capex.

In 2022, Woodring expects 25% cloud capex growth based on a strong June quarter. But he expects cloud capex growth to fall to 5% in 2023, according to the news reported by Investor's Business Daily.

“The cloud capex deceleration in 2023 suggests that hyperscalers may be entering a digestion period after three consecutive years of accelerating cloud capex growth,” Woodring said in his note to clients.

Spending on cloud infrastructure jumped during the coronavirus pandemic. It came as e-commerce boomed.

Sources: Press materials received from the company and additional information gleaned from the company’s website.

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