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%.
Sanjay Beri, chief executive officer and founder of Netskope Inc., listens during a Bloomberg West television interview in San Francisco, California.
David Paul Morris | Bloomberg | Getty Images
Cloud security platform Netskope will go public on the Nasdaq under the ticker symbol “NTSK,” the company said in an initial public offering filing Friday.
The Santa Clara, California-based company said annual recurring revenue grew 33% to $707 million, while revenues jumped 31% to about $328 million in the first half of the year.
But Netskope isn’t profitable yet. The company recorded a $170 million net loss during the first half of the year. That narrowed from a $207 million loss a year ago.
Netskope joins an increasing number of technology companies adding momentum to the surge in IPO activity after high inflation and interest rates effectively killed the market.
So far this year, design software firm Figma more than tripled in its New York Stock Exchange debut, while crypto firm Circle soared 168% in its first trading day. CoreWeave has also popped since its IPO, while trading app eToro surged 29% in its May debut.
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Netskope’s offering also coincides with a busy period for cybersecurity deals.
Founded in 2012, Netskope made a name for itself in its early years in the cloud access security broker space. The company lists Palo Alto Networks, Cisco, Zscaler, Broadcom and Fortinet as its major competitors.
Netskope’s biggest backers include Accel, Lightspeed Ventures and Iconiq, which recently benefited from Figma’s stellar debut.
Morgan Stanley and JPMorgan are leading the offering. Netskope listed 13 other Wall Street banks as underwriters.
Meta CEO Mark Zuckerberg makes a keynote speech at the Meta Connect annual event at the company’s headquarters in Menlo Park, Calif., on Sept. 25, 2024.
Manuel Orbegozo | Reuters
Meta is planning to use its annual Connect conference next month to announce a deeper push into smart glasses, including the launch of the company’s first consumer-ready glasses with a display, CNBC has learned.
That’s one of the two new devices Meta is planning to unveil at the event, according to people familiar with the matter. The company will also launch its first wristband that will allow users to control the glasses with hand gestures, the people said.
Connect is a two-day conference for developers focused on virtual reality, AR and the metaverse. It was originally called Oculus Connect and obtained its current moniker after Facebook changed its parent company name to Meta in 2021.
The glasses are internally codenamed Hypernova and will include a small digital display in the right lens of the device, said the people, who asked not to be named because the details are confidential.
The device is expected to cost about $800 and will be sold in partnership with EssilorLuxottica, the people said. CNBC reported in October that Meta was working with Luxottica on consumer glasses with a display.
Meta declined to comment. Luxottica, which is based in France and Italy, didn’t respond to a request for comment.
Meta began selling smart glasses with Luxottica in 2021 when the two companies released the first-generation Ray-Ban Stories, which allowed users to take photos or videos using simple voice commands. The partnership has since expanded, and last year included the addition of advanced AI features that made the second generation of the product an unexpected hit with early adopters.
Luxottica owns a number of glasses brands, including Ray-Ban, and licenses many others like Prada. It’s unclear what brand Luxottica will use for the glasses with AR, but a Meta job listing posted this week said the company is looking for a technical program manager for its “Wearables organization,” which “is responsible for the Ray-Ban AR glasses and other wearable hardware.”
In June, CNBC reported that Meta and Luxottica plan to release Prada-branded smart glasses. Prada glasses are known for having thick frames and arms, which could make them a suitable option for the Hypernova device, one of the people said.
Last year, Meta CEO Mark Zuckerberg used Connect to showcase the company’s experimental Orion AR glasses.
The Orion features AR capabilities on both lenses, capable of blending 3D digital visuals into the physical world, but the device served only as a prototype to show the public what could be possible with AR glasses. Still, Orion built some positive momentum for Meta, which since late 2020 has endured nearly $70 billion in losses from its Reality Labs unit that’s in charge of building hardware devices.
With Hypernova, Meta will finally be offering glasses with a display to consumers, but the company is setting low expectations for sales, some of the sources said. That’s because the device requires more components than its voice-only predecessors, and will be slightly heavier and thicker, the people said.
Meta and Ray-Ban have sold 2 million pairs of their second-generation glasses since 2023, Luxottica CEO Francesco Milleri said in February. In July, Luxottica said that revenue from sales of the smart glasses had more than tripled year over year.
As part of an extension agreement between Meta and Luxottica announced in September, Meta obtained a stake of about 3% in the glasses company according to Bloomberg. Meta also gets exclusive rights to Luxottica’s brands for its smart glasses technology for a number of years, a person familiar with the matter told CNBC in June.
Although Hypernova will feature a display, those visual features are expected to be limited, people familiar with the matter said. They said the color display will offer about a 20 degree field of view — meaning it will appear in a small window in a fixed position — and will be used primarily to relay simple bits of information, such as incoming text messages.
Andrew Bosworth, Meta’s technology chief, said earlier this month that there are advantages to having just one display rather than two, including a lower price.
“Monocular displays have a lot going for them,” Bosworth said in an Instagram video. “They’re affordable, they’re lighter, and you don’t have disparity correction, so they’re structurally quite a bit easier.”
‘Interact with an AI assistant’
Other details of Meta’s forthcoming glasses were disclosed in a July letter from the U.S. Customs and Border Patrol to a lawyer representing Meta. While the letter redacted the name of the company and the product, a person with knowledge of the matter confirmed that it was in reference to Meta’s Hypernova glasses.
“This model will enable the user to take and share photos and videos, make phone calls and video calls, send and receive messages, listen to audio playback and interact with an AI assistant in different forms and methods, including voice, display, and manual interactions,” according to the letter, dated July 23.
The letter from CBP was part of routine communication between companies and the U.S. government when determining the country of origin for a consumer product. It refers to the product as “New Smart Glasses,” and says the device will feature “a lens display function that allows the user to interface with visual content arising from the Smart Features, and components providing image data retrieval, processing, and rendering capabilities.”
CBP didn’t provide a comment for this story.
The Hypernova glasses will also come paired with a wristband that will use technology built by Meta’s CTRL Labs, said people familiar with the matter. CTRL Labs, which Meta acquired in 2019, specializes in building neural technology that could allow users to control computing devices using gestures in their arms.
The wristband is expected to be a key input component for the company’s future release of full AR glasses, so getting data now with Hypernova could improve future versions of the wristband, the people said. Instead of using camerasensors to track body movements, as with Apple’s Vision Pro headset, Meta’s wristband uses so-called sEMG sensortechnology, which reads and interprets the electrical signals from hand movements.
One of the challenges Meta has faced with the wristband involves how people choose to wear it, a person familiar with the product’s development said. If the device is too loose, it won’t be able to read the user’s electrical signals as intended, which could impact its performance, the person said. Also, the wristband has run into issues in testing related to which arm it’s worn on, how it works on men versus women and how it functions on people who wear long sleeves.
The CTRL Labs team published a paper in Nature in July about its wristband, and Meta wrote about it in a blog post. In the paper, the Meta team detailed its use of machine learning technology to make the wristband work with as many people as possible. The additional data collected by the upcoming device should improve those capabilities for future Meta smart glasses.
“We successfully prototyped an sEMG wristband with Orion, our first pair of true augmented reality (AR) glasses, but that was just the beginning,” Meta wrote in the post. “Our teams have developed advanced machine learning models that are able to transform neural signals controlling muscles at the wrist into commands that drive people’s interactions with the glasses, eliminating the need for traditional—and more cumbersome—forms of input.”
Bloomberg reported the wristband component in January.
Meta has recently started reaching out to developers to begin testing both Hypernova and the accompanying wristband, people familiar with the matter said. The company wants to court third-party developers, particularly those who specialize in generative AI, to build experimental apps that Meta can showcase to drum up excitement for the smart glasses, the people said.
In addition to Hypernova and the wristband, Meta will also announce a third-generation of its voice-only smart glasses with Luxottica at Connect, one person said.
That device was also referenced by CBP in its July letter, referring to it as “The Next Generation Smart Glasses.” The glasses will include “components that provide capacitive touch functionality, allowing users to interact with the Smart Glasses through touch gestures,” the letter said.
Google CEO Sundar Pichai gestures to the crowd during Google’s annual I/O developers conference in Mountain View, California on May 20, 2025.
Camille Cohen | Afp | Getty Images
Alphabet shares rose on a Friday report that Apple is in early discussions to use Google’s Gemini AI models for an updated version of the iPhone-maker’s Siri assistant.
The company’s shares rose more than 3% on the Bloomberg report, which said Apple recently inquired of Google about the potential for the search giant to build a custom AI model that would power a new Siri that could launch next year. Google’s flagship AI models Gemini have consistently been atop key benchmarks for artificial intelligence advancements while Apple has struggled to define its own AI strategy.
The reported talks come as Google faces potential risk to its lucrative search deals with Apple. This month, a U.S. judge is expected to rule on the penalties for Google’s alleged search monopoly, in which the Department of Justice recommending eliminating exclusionary agreements with third parties. For Google, that refers to its search position on Apple’s iPhone and Samsung devices — deals that cost the company billions of dollars a year in payouts.
The Android maker has said its Gemini models will become the default assistant on Android phones. Google this year has showed Gemini doing capabilities that go beyond Siri’s capabilities, such as summarizing videos.
Craig Federighi, who oversees Apple’s operating systems, said at last year’s developer conference that the iPhone maker would like to add other AI models for specific purposes into its Apple Intelligence framework. Federighi specifically mentioned Google, whose Gemini can now hold conversations with users and handle input that comes from photos, videos, voice or text. Apple is also exploring partnerships with Anthropic and OpenAI as it tried to renew its AI roadmap, according to a June Bloomberg report.
Documents revealed during Google’s remedy trial showed executives from Apple were involved in the negotiations over using Google’s Gemini for a potential search option.