Connect with us

Published

on

Amazon CEO Andy Jassy speaks at the Bloomberg Technology Summit in San Francisco on June 8, 2022.

David Paul Morris | Bloomberg | Getty Images

As growth in traditional tech equipment and software slowed to a trickle in recent years, cloud computing gobbled up spending, reflecting a dramatic change in how companies were choosing to run applications and store data.

But in the past two weeks, the biggest names in cloud infrastructure issued clear warnings to suggest that the frenetic expansion of the past half-decade is cooling. Historically high inflation and a steady increase in interest rates by the Federal Reserve have led businesses to curtail spending and seek ways to get more out of their existing infrastructure.

Amazon, Microsoft and Alphabet, the three leaders in the market for cloud-based storage and servers, all reported deceleration in their respective businesses. On Thursday, Amazon Web Services and Google Cloud, which also includes Workplace productivity software, showed revenue for the fourth quarter that was below analysts’ estimates.

“In Q4, we saw slower growth of consumption as customers optimized GCP cost, reflecting the macro backdrop,” Ruth Porat, Alphabet’s chief financial officer, told analysts on the earnings call.

Google Cloud revenue growth slowed to 32% in the fourth quarter from almost 38% in the third period. Revenue of $7.32 billion trailed analysts estimates of $7.43 billion, according to StreetAccount.

Amazon, which pioneered the market over 15 years ago and maintains a commanding lead, said AWS revenue growth decelerated to 20% from 27%. The unit notched sales of $21.4 billion, while analysts were projecting $21.87 billion. As recently as 2018, AWS was growing over 45%.

Brian Olsavsky, Amazon’s finance chief, told analysts that large companies worked with AWS in the fourth quarter to trim their spending because of the difficult economy, a trend that started in the middle of the third quarter. He’s not expecting it to reverse anytime soon.

“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,” Olsavsky said.

Amazon CEO Andy Jassy, who started AWS with company founder Jeff Bezos and ran the division until taking the helm at the parent company in 2021, spoke up later on the call to tout the robust pipeline of cloud migrations. However, according to a regulatory filing, customers are showing less confidence in longer-term deals. Amazon reported $110.4 billion in commitments on contracts with original terms longer than one year. That was up 37% from a prior year, a decline from 57% growth in the third quarter.

Analysts at Bank of America lowered their forecast for AWS, and now expect growth for the year of 11% instead of 15%. That would be down from nearly 29% in 2022.

“We see LT cloud trajectory as bent and not broken,” wrote the analysts, who have a buy rating on the stock.

Results from Alphabet and Amazon follow Microsoft’s report last week. Microsoft’s Azure unit is second in cloud infrastructure to AWS.

Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022.

SeongJoon Cho | Bloomberg | Getty Images

Microsoft said its Azure and other cloud services revenue growth slowed to 31% from 35%, though the company doesn’t disclose the size of the business in dollars.

On the earnings call, Chief Financial Officer Amy Hood said growth in Azure consumption moderated in December. The company expects even slower Azure growth in the first quarter as organizations look for opportunities to run their existing applications in a more cost-effective manner.

CEO Satya Nadella acknowledged that trend, but said it’s not permanent.

“At some point, the optimizations will end,” Nadella said on the earnings call. “In fact, the money that they save in any optimization of any workload is what they’ll plough into new workloads, and those workloads will start ramping up.”

Nadella’s view is supported by at least some industry experts. Tech research firm Gartner is expecting the category to grow overall by 26.8% in the full year, compared with 25.9% in 2022. The Gartner prediction across all of IT is for revenue growth of 2.4%.

WATCH: Truist Securities’ Youssef Squali explains why Amazon stock is trading low

Truist Securities' Youssef Squali explains why Amazon stock is trading low

Continue Reading

Technology

How TikTok’s rise sparked a short-form video race

Published

on

By

How TikTok’s rise sparked a short-form video race

TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.

Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.

TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.

“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”

Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.

“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.

But there may a dark side to this growth.

As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.

“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”

Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.

“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”

Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.

While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.

Watch the video to understand how TikTok’s rise sparked a short form video race.

Continue Reading

Technology

Elon Musk’s xAI Holdings in talks to raise $20 billion, Bloomberg News reports

Published

on

By

Elon Musk's xAI Holdings in talks to raise  billion, Bloomberg News reports

The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)

Nurphoto | Nurphoto | Getty Images

Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.

The funding would value the company at over $120 billion, according to the report.

Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.

The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.

Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.

Faber Report: Elon Musk held call with current xAI investors, sources say

The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.

“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”

Read the full Bloomberg story here.

— CNBC’s Samantha Subin contributed to this report.

Continue Reading

Technology

Alphabet jumps 3% as search, advertising units show resilient growth

Published

on

By

Alphabet jumps 3% as search, advertising units show resilient growth

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.

David Paul Morris | Bloomberg | Getty Images

Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.

GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”

The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.

Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.

Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.

Read more CNBC tech news

Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.

During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.

Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.

Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.

Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.

“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.

WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard

Gemini delivering well for Google, says Check Capital's Chris Ballard

CNBC’s Jennifer Elias contributed to this report.

Continue Reading

Trending