Once untouchable, the cloud computing sector, led by AWS, is showing signs of weakness.

Kelly Teal, Contributing Editor

January 5, 2023

8 Slides

The once-untouchable cloud computing sector is showing signs of weakness. And now questions are starting to surround Amazon Web Services (AWS) in 2023 as the bellwether for the category begins to lag.

As the largest cloud provider with the most revenue and market share, AWS is indeed the company to watch as cracks begin to show in the cloud computing world. In fact, speculation is running rampant over how long AWS can sustain its $20-billion-plus per-quarter revenue. To that point, “it seems likely that Amazon has overbuilt its cloud business,” writes Timothy Green over at The Motley Fool. “Operating margin for AWS was down about 4 percentage points year over year in the third quarter, which suggests that the company expanded too quickly.”

Investors, Green added, “should brace themselves for deteriorating AWS profitability” when Amazon reports its fourth-quarter earnings.

Indeed, from financial pundits to cloud executives themselves, concern is growing about cloud customers pulling back on spending. That’s especially at market leader AWS in 2023. Over the past quarter or so, during earnings calls, executives have noted customers paying greater attention to cloud computing expenses. They’re telling analysts that they see organizations taking measures to curb costs.

In any other industry, such spending consciousness would seem like a no-brainer. With cloud computing, though, there seems to be some kind of disconnect where providers act shocked when end users finally pay attention to outlay.

In summary, it’s clear that the excesses of COVID-19-era cloud provisioning are slowing at last. Providers are hitting unexpected walls. They’re reacting with hiring freezes and employee layoffs. AWS itself implemented a hiring freeze last year which it has yet to lift. And there are a lot of questions surrounding the possibility of layoffs at AWS in 2023.

In the slideshow above, we examine what could lie in store for AWS in 2023 across several areas. We cover ground from Amazon’s stock price to AWS’ channel activity.

Want to contact the author directly about this story? Have ideas for a follow-up article? Email Kelly Teal or connect with her on LinkedIn.

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About the Author(s)

Kelly Teal

Contributing Editor, Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.

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